Finance News

It is the Cheapest Time to Get a Mortgage

Em Morley - January 12, 2015

Mortgages are currently the cheapest on record, revealed new figures.

Two-year fixed and variable rate deals have dropped to new lows as mortgage providers attempt to entice borrowers.

Banks and building societies are trying to attract new buyers after demand dropped in the last half of 2014.

However, stricter lending rules have made it more difficult for some borrowers to get a mortgage in the last few months.

There are concerns around a forthcoming rise in interest rates and many buyers are waiting to see if the Bank of England (BoE) increases its base rate from the current historic low of 0.5%.

But the BoE is not due to raise the base rate until the end of 2015, or even 2016. Lenders are therefore offering super-low offers.

It is the Cheapest Time to Get a Mortgage

It is the Cheapest Time to Get a Mortgage

Experts believe that now could be one of the best times ever to enter into a fixed rate mortgage, before rates do increase.

The average interest rate for a two-year fixed rate home loan, with a deposit of at least 25%, was only 2.08% in December, the lowest figure since records began in 1995.1

This deal is the most common type for borrowers, and dropped from 2.17% a month earlier.

Interest rates on a two-year variable rate with a discount have also never been lower, down from 1.81% to 1.63% in a month. Lifetime trackers are near record lows, at 2.86%.1

Citi, the global bank, says that these numbers indicate: “Key mortgage rates generally continued to fall in December, and many mortgage rates now are at or around record lows.”1

From financial website Moneyfacts, Sylvia Waycot says: “mortgage lenders are now fighting for our attention.

“Almost daily, new deals are being launched as each lender tried to out-do its competitor, which at last is some great news for the borrower.”1

The BoE says that demand for mortgages has “decreased significantly” in the last quarter of 2014.1

This is apparently down to the Bank’s mortgage market review, which made lenders check that borrowers can afford to meet their monthly repayments if interest rates were to rise.

Banks must now conduct thorough checks on aspiring buyers’ spending habits before they can offer them a home loan, which has seemingly led to less approvals.

1 http://www.dailymail.co.uk/news/article-2907341/Mortgage-rates-plummet-lenders-bid-business-demand-decreased-end-2014.html