during the first six weeks of 2011 there was a growing belief that the Bank of England Base Rate would increase sooner than initially anticipated, something that was reflected in the increased swap rates. This resulted in many lenders re-pricing fixed rate mortgages and left borrowers feeling that they had missed the bottom of the market.
However, volatility persists in the market and over the last five weeks swap rates have started to fall back again with the five-year rate down from 3.19 per cent to 2.77 per cent while the two-year rate has dropped from 1.98 per cent to 1.73 per cent.
This is good news for people who are keen to lock into the security and certainty of a longer term fixed-rate mortgage, with some lenders starting to pass these cuts on to their customers.
In the last week we've seen ING Direct cut the rate on its five-year mortgage by 0.35 per cent to 4.99 per cent for a 75 per cent LTV deal with a low fee of £195 to boot. Similarly Nationwide Building Society has chopped 0.4 per cent from its five-year mortgage which is now a best buy for 70 per cent LTV deals at 4.59 per cent with just a £99 booking fee.
Looking at a shorter fixed rate period, rates are being trimmed in this arena too, with Yorkshire Building Society reducing the rate on its two-year home loan by 0.3 per cent to 3.49 per cent for a 75 per cent LTV mortgage with a fee of £195.
There are cheaper borrowing rates available if you're comfortable with a tracker mortgage, but for those with little room for manoeuvre in their monthly budget, the news of lower priced fixed-rate options will be most welcome.
Short-term bonds offering better returns
There has been a marked turnaround in rates being offered for one-year fixed-rate bonds where just four months ago it was a real struggle to find a deal paying 3 per cent or more. Looking at the best buys this week, there are now at least 10 of these bonds offering a return of 3.25 per cent or more, with Aldermore heading the best buys at 3.45 per cent followed closely by AA and FirstSave at 3.4 per cent.
The margin over instant access accounts has improved to 0.4 per cent, meaning an extra £200 per year pre tax on a balance of £50,000.
It remains a tough environment for savers, but it's important to retain the savings habit and to continue to build your nest egg – at least you'll be in a position to take advantage of betterrates when they do eventually pick up.
Andrew Hagger is a money analyst at Moneynet.co.ukReuse content