The Great Mortgage Rate Divide

19 Jul 2016

The Great Mortgage Rate Divide

As the lowest fixed-rate mortgages fall below 1%, thousands of borrowers are suffering on standard variable rates, which can be up to five times higher.

Mortgage rates are in freefall, and are expected to plunge even lower following the UK’s vote to leave the European Union.

One gauge of where mortgage rates might head is the “swap rate” for a given period of lending. This mirrors the cost of capital to the banks. Following the vote to leave the EU, swap rates plummeted.

Mortgage providers could still constrict their criteria for lending, but those who qualify for the best deals will be able to borrow at some of the lowest rates ever.

Over the past 12 months the rate on the average two-year fixed-rate mortgage has fallen from 2.8% to 2.5%, according to Moneyfacts.

The cheapest two-year fixed mortgage, including fees, comes from HSBC with a rate of 0.99% and fees of £1,762. However, the pitfall is you can only borrow up to a maximum of 65% of the property’s value.

For those with a 10% deposit, HSBC comes out on top again with a 1.97% rate, £1,762 in fees and an average annual cost over the fixed term of £16,830 for a £250,000 mortgage.

A wide range of mortgage specialists are expecting some of the best fixed rates to reduce further.

Traditionally, the summer break is not the most competitive time in the mortgage industry, but there might be a price war as we head into the autumn housing market. People could be looking to snap up a bargain given the recent weather.

At the longer end of the spectrum, Coventry Building Society now offers a 10-year fix at a rate of just 2.49%, with fees of £999. This leads to an annual cost of £10,880 on a £200,000 25-year mortgage.

Are you looking to secure a mortgage so you can purchase your dream property? Contact deVere Mortgages today and speak to our mortgages experts.