2-year fixed mortgage rates have started to drop back below 5% following the hikes seen in following Kwasi Kwarteng’s failed mini-Budget in September, L&C data shows.
Both Coventry Building Society and Principality Building Society have launched 2-year deals that breach the 5% mark.
Principality is offering a rate of 4.65% fixed for 2-years to 65% loan-to-value (LTV) with an £895 fee (min loan is £140k).
Meanwhile, the Coventry is now offering a 2-year fix at 4.85% to 65% LTV with a £999 fee.
5-year rates continue to sit at lower rates than their shorter-term counterparts generally.
Principality is offering a 5-year fix at 4.60% to 65% LTV although it does carry a higher fee at £1395. Coventry’s 5-year option is at 4.69% to 65% LTV with a £999 fee.
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 £1083.24p.m. compared to £842.29p.m. on the 2-year fix rate 4.60% from Principality, a saving of £241 per month or more than £2890 per annum.
Meanwhile, 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 2-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 (pictured), associate director at L&C Mortgages, said: “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.”
