Fixed mortgage rates at record low

The interest charged on short-term fixed rate mortgages fell to a record low during May as lenders passed on reductions in their own funding costs to borrowers, figures showed today.







The average cost of a two-year fixed rate deal dropped for the third consecutive month, falling by 0.19% to stand at 3.47%, according to the Bank of England.



Interest charged on tracker mortgages remained at their record low of 3.45%, while there was also a fall in the cost of five-year fixed rate deals, with the cost of these now averaging 5%.



The downward momentum on mortgage rates appears to have continued into June, with a flurry of lenders slashing their rates during the past few days, including big names, such as Halifax, Nationwide, Lloyds TSB and NatWest.



The reduction in the price of fixed rate mortgages is being driven by a fall in swap rates, upon which the deals are partially based, as the Bank of England's Monetary Policy Committee is widely expected to put off raising the base rate until the final quarter of this year.



There has also been a further improvement in the number of mortgages available to people with only small deposits, with 31 different loans now available for people with 5% to put down, up from 24 at the start of the year and the highest level since December 2008.



Choice for people with deposits of 10% has also risen to 244 from 199 during the same period, while there are now 545 mortgages available for those borrowing 85% of their home's value, compared with 480 at the start of the year.



David Hollingworth, of mortgage brokers London & Country, said: "The expectations for interest rate rises have diminished, so the funding costs for lenders have dropped back, and they are passing that on."



He said best-buy deals for people looking to fix for five years had fallen below 4% again, while two-year mortgages were available for just over 3%.



Yorkshire Building Society currently has the most competitive two-year fixed rate mortgage at 2.99%, for people with a 25% deposit who pay a £995 fee.



The group also has the best five-year deal at 3.99%, based on someone borrowing up to 75% of their home's value and paying a £995 fee.



Although market conditions still remain difficult, the Council of Mortgage Lenders recently predicted that lending levels would increase this year for the first time since the credit crunch struck.



The group has raised its forecast for net lending, which strips out redemptions and repayments, by 50% from £6 billion to £9 billion for 2011, increasing to £12 billion in 2012 as the recovery continues.



The group said lenders appeared to have made good early progress in repaying government support schemes, and refinancing wholesale funding, while credit conditions had eased a little.



But although the rise would be the first increase since 2006, lending levels remain just a fraction of the £110 billion that net lending totalled that year.

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Recruitment Genius: Credit Controller / Customer Service

    £18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

    Guru Careers: In-House / Internal Recruiter

    £25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Day In a Page

    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project