"The roller coaster ride for borrowers continues with potential for confusion as fixed rates come back down despite the prospect of a further increase in Base Rate as early as next week."
Two-year fixed rates have seen 'notable' reductions in the last week, according to analysis from L&C Mortgages, with many lenders dropping rates back below 5%.
Following data from last week, which showed a substantial shift downwards in fixed rates over the course of November, further moves have taken effect.
L&C says the fall in swap rates is driving further improvements in fixed rates and Coventry BS and Principality BS have both launched two-year deals that breach the 5% mark.
Principality is offering a rate of 4.65% fixed for two years to 65% LTV with an £895 fee, while Coventry BS is now offering a two-year fix at 4.85% to 65% LTV with a £999 fee.
Despite the reduction in two-year rates, five-year options continue to generally sit at lower rates than their shorter term counterparts. Principality is offering a five-year fix at 4.60% to 65% LTV although it does carry a higher fee at £1,395. Coventry’s five-year option is at 4.69% to 65% LTV with a £999 fee.
SVRs keep climbing
The recent rises in base rate carry on feeding through to lender standard variable rates. Virgin Money is the latest to feed through the last rate hike with its SVR lifting from 6.49% to 7.24%. A borrower with a £150,000 25 year mortgage at 7.24% would be paying £1,083.24 p.m. compared to £842.29 p.m. on the two-year fix rate 4.60% from Principality, a saving of £241 per month or more than £2,890 per annum.
Trackers offer an alternative option
Those that prefer to play a waiting game to see if fixed rates could keep on falling could still do better than a SVR. Base rate trackers have been seeing higher take up as some borrowers decide that although they could climb further the lower initial rates on offer still look like attractive. Some tracker deals also have the benefit of no early repayment charges at any time, which gives additional reassurance that they can switch to a fixed rate at a later date if they feel that’s a better option.
For example, Barclays offers a two-year tracker at 0.40% above Base Rate, giving an initial pay rate of 3.40%, to 60% LTV with a £999 fee. It carries no ERC at any time.
David Hollingworth, associate director at L&C Mortgages, commented: “The roller coaster ride for borrowers continues with potential for confusion as fixed rates come back down despite the prospect of a further increase in Base Rate as early as next week. The reductions in fixed rates offers those whose natural inclination is to put security into their mortgage payment the chance to do so at a more appealing rate and that shouldn’t stop them being able to review again if rates come down further. Taking some action is likely to be more cost effective than drifting onto standard variable rate where rates continue to feed base rate increases through to borrowers and many are around the 6.50% with some in excess of 7%. Taking advice will not only help you understand the options available but also help you keep abreast of any further shift in rates.”
