The Bank of England base rate has remained at the record low of 0.5 per cent since March 2009, leading to the appearance of a large number of competitive mortgages in recent years. Recently, the lowest ever deals have hit the market, which could tempt more people to buy a property and take advantage of the low rates.
Record Mortgage Rates
Fixed-rate mortgages have been dropping for some time, and in May 2015 it was reported that they are now at an all-time low when Yorkshire Building Society (YBS) announced the lowest ever two-year fixed rate deal at 1.07% with a 35% deposit. So while five-year rates and 10-year rates are going up slowly, lenders are trying to provide the best deals on shorter-term deals.
In June, Chelsea Building Society launched a two-year tracker mortgage with a 0.98% interest, as reported in the Daily Mail. This is the first ever to go below 1%, but again a 35% deposit is required, with a fee of £1,675.
Why Are Mortgage Rates Dropping?
In recent years, the Bank of England has introduced measures to cut the costs of borrowing. The base rate of 0.5% has not increased in years, and this is one reason why mortgage rates are at historic lows.
However, the other pressure on rates comes from greater competition as new lenders have entered the market. This competitive pressure has pushed prices down even further, leading to the particularly low rates that we are seeing this year.
Should You Choose a Mortgage Based on Rate Alone?
When you choose a mortgage, always look beyond the rates alone. Other costs are involved, including various arrangement fees, and these can make a mortgage more expensive.
You may find that some mortgages have a higher interest rate but include a free valuation and free legal work. So always compare the market and find out exactly how much you will pay overall rather than just being influenced by rates.
What Does the Future Hold?
The only certainty about the future is that interest rates will go up at some point. However, when they go up and by how much is up for debate. The latest estimates suggest that the Bank of England will start to increase the base rate some time in 2016. How high it will go, however, is not known.
What it means for you is that even if you do find a competitive mortgage, you should plan for rates to increase in the coming years – and you must work out whether you will be able to afford the repayments. Many are expected to encounter difficulties when rates increase, so make sure you are properly prepared for the expected rise.
Of course if in any doubt you should consult an Independent Financial Advisor to discuss the best options for you and your circumstances.
If you are currently considering buying or renting a residential property an independent home search consultancy could help you to source and secure the ideal property and guide you through the transaction process.
Call Richard Mottley on 0800 999 5758 or 07769 32 57 58 for further information or submit an enquiry here: http://sanderlinghomesearch.com/contact