Five questions on: Record-low mortgage rates

 

Simon Read@simonnread
Friday 01 May 2015 18:59
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What are these deals?

The lowest-ever two-year fixed-rate mortgage was launched yesterday – by the Co-operative Bank. At just 1.09 per cent, the rate will lead the best-buy tables.

Should I rush to snap it up?

Whoa! The tempting rate is only available to those with at least a 40 per cent deposit and it comes with an expensive arrangement fee of £1,499. Anyway, competition is getting so fierce now that we could soon see even lower rates, reckons Mark Harris, chief executive of the mortgage broker SPF Private Clients. "With the Co-op launching a two-year fix at 1.09 per cent, unbelievable as it may seem, it could only be a matter of time before we have a sub-1 per cent two-year fix," he predicted.

So should I hang on for better deals?

Hmmm. That's a slightly risky idea, especially with next week's election set to add further confusion to the economy and, ultimately, the mortgage market. Adrian Anderson, director of the broker Anderson Harris, advised: "If you need a mortgage now, and can access one of these great rates, it makes sense to secure it rather than holding out in the hope of a lower one."

Anything else I should think about?

It may actually be better to fix for a longer term. There are fairly decent 10-year deals around, although most people seem to be picking a five-year deal to give them the reassurance of knowing that they can afford their mortgage for the next 60 months, irrespective of what happens to the economy or interest rates.

Aren't five-year deals a lot more expensive?

Not really. Sure, you won't get a rate as attractive as 1.09 per cent, but taking into account the high fee and a switch into what may be a much higher rate in two years' time, you could end up better off over the long term with a decent five-year fix now.

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