2015 has been a positive year thus far for anyone looking for a good mortgage deal. According to the latest reports approximately £1,700 has been shaved off the cost of a mortgage over the past four weeks alone. The Daily Telegraph has been looking into the latest figures and determined this amount could potentially be saved by those with a £200,000 loan. It applies to those re-mortgaging their properties using one of the most appealing deals currently available.
How cheap are the current available rates for mortgages?
Rates vary depending on the lender and the particular deals on offer. Generally speaking the shorter the lock-in period for fixed rates is, the cheaper they are. For example First Direct is offering a rate of 2.28% over five years, and 2.89% over 10 years. However many experts believe we could be close to seeing rates of less than 2% for five-year fixed deals. They could even drop below 1% on two-year deals in the near future. This kind of rate is hard to imagine, and indeed experts believe this would be a highly unusual situation for the market to be in.
The rates offered may also depend on the percentage you can put down as a deposit. The higher the initial deposit the cheaper the interest rate could potentially be. A good example is the current deal offered by HSBC whereby borrowers can enjoy an interest rate of just 1.19% if they are able to put down 40% as a deposit.
Why are rates dropping again after rumours they were going to head in the opposite direction?
The reason is down to the Bank of England. As 2014 came to a close speculation was rife that the Bank of England was going to start raising interest rates. First of all it looked as though this might happen before the end of 2014. When this didn’t occur the goalposts of speculation moved to early in 2015.
While no one can be certain when the Bank of England is going to start raising rates, it seems as though it could take a lot longer than was previously assumed to be the case. This has meant banks and building societies have been keen to ensure they are competitive, thus offering incredibly low rates in the hope of winning more business.
The good news is this could perk up the market somewhat after the lull we saw last year when the MMR changes came into force. Now we are close to the one-year anniversary of these changes, many potential homeowners will be glad to see more affordable rates available. With 10-year fixed rate deals available as well, it makes sense for some people to lock into an affordable rate for the foreseeable future. It certainly offers a level of stability at a good rate they may never have had the chance to take advantage of before.
It remains to be seen how long it will be before the sub-1% rate becomes a reality.