The best fixed rate mortgage deals
Tuesday, 06 September 2011 12:12
By Kate Saines
If there was ever a time to consider switching to a fixed-rate mortgage – it could well be now.
In the last month a splendid array of fixed-term products have been released to the mortgage and remortgage market with rates below 3.5 per cent for those with healthy deposits.
And there are even some deals out there for those buyers who are purchasing their first home or who have only a small deposit to put down.
But there are borrowers who may not benefit from these tempting new rates. And with talk the interest rates might not start rising from their 0.5 per cent low until 2013, there will be some reluctance to fix – even with such dazzling rates.
Here’s the round-up of the best new products and expert opinion to help you make up your mind.
The Best Two-Year Deals
Currently some of the best two and three-year fixed-rate deals come courtesy of ING Direct, Chelsea Building Society and Nationwide.
ING is offering 2.49 per cent to borrowers fixing until November 2013, and those who want to lock-in for a more lengthy three years will pay 3.34 per cent.
The latter comes with the benefit of no fees. But you’ll only qualify for these deals if you have a loan-to-value (LTV) of up to 60 per cent – in other words, you’ll need a deposit of at least 40 per cent.
Meanwhile, Chelsea has a 2.39 per cent two-year mortgage on offer for borrowers with 70 per cent LTVs, though it comes with a hefty fee of £1,495.
Then there’s First Direct. Not all the ‘tables’ are showing this one but it’s worth looking into since the rate on offer is 2.49 per cent for a maximum LTV of 65 per cent. There’s a lender fee of £1,499.
And Nationwide has a two-year fixed-rate mortgage for borrowers with an LTV of 60 per cent. The interest rate is 2.64 per cent.
The best two-year deal for those with a smaller deposit of 15 per cent or a LTV of 85 per cent comes from the Norwich & Peterborough Building Society which charges interest at 3.79 per cent with a fee of £995.
Use the Myfinances.co.uk comparison tables to find the best deal on a new mortgage.
Best Three-Year Deals
Nationwide has a three-year version available for borrowers with smaller deposits – up to 70 per cent LTV. This has a rate of 2.89 per cent. It comes with a £999 fee.
Yorkshire Building Society has a three-year fixed rate deal available that charges 2.79 per cent for those with an LTV of 75 per cent. The fee is £995.
And Coventry Building Society is charging interest of 2.99 per cent until 2014 on its three-year fixed rate mortgage, which comes with a £999 fee.
The Best Five-year Deals
It’s the five-year fixed-rate mortgage market where rates are really improving. Ray Boulger, of independent mortgage adviser John Charcol, explained it’s all down to the fact gilts (government bonds) have hit a 50-year low.
“The time has come to consider fixing your mortgage,” he said in August, “because the collapse of over 0.5 per cent in gilt yields over the last month, resulting in lower swap rates, is now being reflected in some significantly better five-year fixed-rate mortgages.”
Chelsea Building Society is offering a five-year fixed rate mortgage deal that charges interest of just 3.29 per cent for those with an LTV of 70 per cent. The fee comes in at £1,495.
Meanwhile, HSBC offers its three-year fixed rate deal at 3.34 per cent for those with a 40 per cent deposit or an LTV of 60 per cent. The fee is £999.
Clydesdale Bank has a five-year fix available for 3.59 per cent to customers with LTVs of up to 70 per cent.
Also coming in under four per cent is ING’s five-year deal, which has a rate of 3.99 per cent for 60 per cent LTV borrowers. And 75 per cent LTV customers will pay 4.09 per cent for the mortgage.
Coventry Building Society recently announced the launch of two new five-year fixed-rate mortgages which included a 3.49 per cent rate for 65 per cent LTV borrowers.
Find a better deal on a mortgage
The Best Ten-Year deals
There have also been lenders proudly flaunting the newly-slashed rates on ten-year fixed-term deals.
Among them is Chelsea Building Society, which is now charging 3.99 per cent interest on its ten-year mortgage. This rate is available for LTVs of up to 70 per cent and comes with a fee of £1,495.
The building society has also slashed the rate on its ‘5,6,7 mortgage’, which allows customers to choose the term of the product, to 3.69 per cent.
According to Chelsea’s mortgage manager, Chris Smith, the option to fix for seven years has proved so popular with the ‘5,6,7’ customers the building society was prompted to launch the ten year product.
It’s not the only lender doing this. Yorkshire Building Society also has a competitive ten-year fixed rate mortgage product. It charges 4.19 per cent in interest and is available to homeowners with a 25 per cent deposit and comes with a fee of £995.
Skipton Building Society has a ten-year fixed-rate mortgage offering an interest rate of 5.85 per cent.
Skipton’s head of products, Kris Brewster, echoed Ray Boulger’s observations on five-year swap rates, saying ten year swap rate are also at their lowest levels, which has enabled it to drop its interest rate on these long-term mortgages.
He said: “5.85 per cent is a very cost effective proposition over a decade term for those customers suited to this kind of product.”
Best deals for First-Time Buyers
90 per cent LTV
If you are struggling to find a deposit, there are still options available because several lenders are offering mortgages for 90 per cent LTVs. Among them is Northern Rock which has a two-year fixed-rate at 5.45 per cent and three-year fix at 5.55 per cent.
Nat West’s two-year fixed-rate of 4.99 per cent for 90 per cent LTVs also looks attractive, although there is a £999 fee.
85 per cent LTV
However, if you can get your deposit up to 15 per cent it opens the door to some much better deals. There are also excellent deals from First Direct, HSBC and best of all the Yorkshire Building Society.
First Direct have a two-year fix at 3.89 per cent with a fee of £995.
HSBC offer a two-year fixed rate product at 3.99 per cent with a fee of £899 and best of all Yorkshire BS offer a two-year fix at just 3.24 per cent for those with a fifteen per cent deposit. The fee is £995 and this product is only available for those borrowing at least £75,000.
Norwich and Peterborough Building Society recently announced it was cutting interest rates on its 85 per cent LTV mortgages.
This means borrowers with a 15 per cent deposit are looking at paying 3.79 per cent interest on a two-year fixed-rate, as mentioned earlier, 4.08 per cent on a three-year deal and 4.68 per cent for five years.
No deposit
There has not been a product like this on the market since the credit crunch but small lender, Aldermore Bank has just released details of a 100 per cent mortgage. There is a catch and that is that a guarantor such as a parent or grandparent has to support the mortgage for ten years through allowing a 25 per cent charge on their own property.
Use the Myfinances.co.uk comparison tables to find a better deal on a new mortgage.
But watch out…
If you are currently on your lender’s standard variable rate (SVR) and it’s lower than even the most alluring fixed-rate deals, you might be better off staying where you are for the time being.
This is because most expert commentators expect interest rates to remain low until at least the middle of 2012.
Howard Archer, economist for IHS Global Insight, has even gone as far as to say he believes the Bank of England will hold off from raising interest rates until 2013. And when they do begin raising them, it is likely to be done at a moderate pace.
“Whenever interest rates do start to rise,” he explained, “the probability is they will move up only gradually and remain very low compared to past norms.”
He added: “Consequently we now suspect interest rates will only rise to 1.5 per cent by the end of 2013.”
If you are not happy with your lender’s SVR or are new to the mortgage market, a short-term fixed rate deal – or even a tracker mortgage – could be your best bet.
Chris Smith, mortgage manager of Chelsea Building Society, which is offering one of the ten-year fixed-rate deals, said: “Shorter term fixed and tracker deals might be the most cost-effective for some types of borrower at the moment.
“However, we think long term fixes could offer an important alternative for those who are expecting to remain in their home over the longer term, who prefer to have payment certainty over a fixed term and value long-term financial planning.”
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