bbc.co.uk, thisismoney.co.uk, moneysupermarket.com (image courtesy of thisismoney.co.uk)
Mortgage Rates at a 23 Year Low
Financial information service Moneyfacts have declared that interest rates are currently at their lowest level since 1988. The reason for this is that lenders are now finding it cheaper to raise funds in the financial markets, due to a realisation that the Bank of England is unlikely to put up the base rate of interest any time soon. This can only be good news for borrowers as lenders bring down mortgage rates and increase competition.Commenting on the service’s findings, Michelle Slade of Moneyfacts said: “Earlier this year the market expected a rise in bank base rate, that saw mortgage rates start to rise. An imminent rise in bank base rate now appears unlikely and the cost of funding on the swap rate market has reduced.” The swap rate determines the cost of borrowing for banks and building societies when they want to borrow longer-term money in the financial markets at a fixed rate. If its rate is low, they then have the option of passing this onto their customers.An interest rate rise had been expected to come from the Bank of England in the second half of this year, but following weak economic data and the action of a new member of the Bank’s rate setting committee, the market is not now expecting a rise until next year. According to Moneyfacts, the average two-year fixed deal is 4.32%, three-year fixed mortgages average at 4.92% and the five-year fixes average 5.29%. To put that in perspective, two-year fixed mortgage average interest rates were 5.59% in the spring of 2009.Leading tracker rate mortgages have also dropped; Moneysupermarket says that the average two-year tracker rate stands at 3.58%. This is the lowest level since the turn of the year and means that the base rate would have to rise 0.60 percentage points over the next two years to equal the best two-year fixed rate deal. However, as always seems to be the case in the current financial climate, lenders still don’t seem to be making the most competitive deals available to customers with smaller deposits.