If you have a good credit record, a regular job, equity or a decent-sized deposit then as far as mortgages go you have never had it so good. That is probably a bit difficult to swallow only a few years on from the great global financial crisis, but the figures prove it. According to financial information service Moneyfacts, rates are dropping across the board even though the headline Bank of England base rate has stayed at 0.5 per cent for four years.
Research from Moneyfacts produced exclusively for the Independent on Sunday shows that over the past year the average rate of a two year, fixed-rate mortgage has fallen from 4.66 per cent to 3.82 per cent. In the three year marketplace, average rates have dropped from 4.86 per cent to 4.13 per cent, while the super-competitive five year fixed-rate mortgages market has seen rates decline from an average 4.86 per cent to 3.86 per cent.
And these average figures only tell part of the story. At the top of the best buy charts there is clearly great competition with Moneyfacts singling out two and five year fixed deals from Norwich and Peterborough charging 2.24 per cent and just 2.74 per cent respectively.
The mortgage market is in a price war fuelled by the Bank of England's Funding for Lending scheme, which has effectively pumped £80bn into the home loan market. Andrew Montlake, director at mortgage brokers Coreco, says borrowing is loosening up: "We have seen definite signs that mortgage lenders are hungry for more business and buoyed by the Funding for Lending Scheme, the rates they are now offering are cheaper than ever."
The FLS cash comes with strings, with the BoE wanting to see this money going out the door in the form of new lending to individuals and business. Sylvia Waycot form Moneyfacts explains: "However, FLS comes with the strict proviso of increasing lending books or face fines. With 40 providers signed up to FLS, each with a need to increase their lending books, we are sure to see competition heat up both in a lowering of rates, a raising of loan to values (LTV) and as those segments of market become crowded with lenders, we may see them fighting for ownership of a product level, such as the five year fixed rate market."
This week HSBC, which doesn't sell through brokers, announced a fee-free lifetime tracker mortgage at just 2.49 per cent. Meanwhile, new entrant Tesco launched a swathe of new products – most eye-catching of which was its two year fixed-rate deal at 1.74 per cent, with an LTV of 60 per cent but with a hefty fee attached.
So with banks seemingly queuing up to lend and the government's Help to Buy scheme set to prime the pump further, how low could rates go? And are mortgage holders who are in a position to remortgage better off staying put right now ready to swap on even lower deals in a few weeks or months?
"If there is a quicker than expected improvement in economic conditions then interest rates will need to rise to a more realistic level rather than held at artificial lows," Mr Montlake says. "With five-year fixes now available from just 2.49% it is difficult to imagine just how much lower these rates could yet fall, but there is every evidence that as competition increases and government aid remains, they could get even lower." .
However, he adds that borrowers must look beyond the headline rate and pore over the additional fees: "Borrowers do need to take care that they are not comparing apples with oranges when deciding on a product, as many of the lowest rates in Best Buy tables have the highest arrangement fees. A quick calculation should be able to reveal whether a borrower is better off with a slightly higher rate and a lower fee over the course of the loan," Mr Montlake said. This is particularly true when the amount borrowed is relatively low, say under £150,000.
Mark Dyason, director, independent mortgage broker, Edinburgh Mortgage Advice concludes that: "While rates have come down across the board, arrangement fees have increased significantly and are now averaging around £1,000. People needing smaller mortgages should generally look for arrangement fee-free deals. As ever, if you're unsure about anything always seek independent advice."
Ashley Brown, director, independent mortgage broker Moneysprite, adds a further word of caution to those playing the waiting game on their current deals: "For anyone on their lender's SVR, they should be looking to fix as soon as possible. Staying on an SVR is basically money down the drain. Not only are you at the mercy of your lender who can hike their SVR at any time, independently of what the Bank of England base rate is doing, but you are probably paying rates of 4% plus, when you could be enjoying five year fixed rates below 3% and two year fixes below 2%.
"Remember, an extra few months on a 4% plus SVR will wipe out any potential savings you might make if fixed rates fall further in the coming months."
As for any future fall in mortgage rates, the good news for those without a huge deposit to put down or equity in their current home is that experts reckon the banks' price war currently focused on 'prime' customers could spread outwards. "We also expect lenders to loosen criteria as they get fed up with competing with each other over pricing," says Mark Harris, chief executive of mortgage broker SPF Private Clients. But how far this low rate bonanza spreads before central bankers once again tighten monetary policy is anyone's guess. Ironically, those with small deposits or less than perfect credit history maybe hoping for gloomier economic news.
"If there is a quicker than expected improvement in economic conditions then interest rates will need to rise to a more realistic level rather than held at artificial lows," Mr Montlake said.