The top ten cheapest two-year fixed rate mortgage deals
By Ben Salisbury
Tracker mortgages have been the best option for homeowners for around three years now and became extremely popular once the Bank of England cut base rate to 0.5 per cent in March 2009.
Well, nothing much has changed in terms of interest rates since then, base rate is still at 0.5 per cent and is unlikely to change in the next year or so.
Tracker vs fixed rate
However, the difference between the fixed-rate deals that most lenders offer and the best variable or tracker rates available has shifted dramatically.
There is often very little between the two now.
Indeed, last week Leeds Building Society launched a two-year fixed rate mortgage deal at 1.99 per cent, the same rate as is available on the cheapest tracker rate.
This is the first time in years that that has happened. This is particularly appealing for borrowers looking for security.
However, experts are warning that low fixed rates are unlikely to stay as low because of a rise in wholesale funding, the rate at which the financial institutions that supply us with mortgages can borrow at.
The three month Libor rate, which sets the cost of mortgages available to us, has risen from 0.83 per cent to 0.95 per cent in the last two months.
The crisis in the eurozone is also likely to affect rates because it is affecting the supply of money and the cost of funding to lenders.
So, if the idea of fixing at below three per cent for the next two years appeals, then take a look at our top buys below.
These deals are only available to homeowners with a maximum loan to value ratio of 75 per cent.
Use the Myfinances.co.uk comparison tables to find the best deal on a new mortgage
| Lender | Rate | Fee | LTV | Fixed until |
|---|---|---|---|---|
| Leeds BS | 1.99% | £1,995 | 75 | 21/12/2013 |
| Yorkshire BS | 2.49% | £995 | 75 | 30/11/2013 |
| Woolwich | 2.58% | £800 | 70 | 31/12/2013 |
| Chelsea BS | 2.39% | £1,495 | 70 | 31/12/2013 |
| Santander | 2.35% | £1,995 | 60 | 31/12/2013 |
| First Direct | 2.65% | £1,495 | 65 | 31/12/2013 |
| Skipton BS | 2.78% | £995 | 75 | 31/01/2014 |
| Northern Rock | 2.99% | £99 | 70 | 01/12/2013 |
| HSBC | 2.99% | £595 | 70 | 30/11/2013 |
| Hanley Economic | 3.09% | £500 | 80 | 30/11/2013 |
The best two-year fixed rate deals
Leeds Building Society, as mentioned above, has a fixed rate deal charging just 1.99 per cent interest. However, it comes with a fee of £1,995, so it only works out as the best deal if you are borrowing more than £164,350. You need 25 per cent equity to qualify for this product. Another point to be aware of with this product is that Leeds calculates interest charges annually rather than daily, as the vast majority of lenders do. This means the actual rate calculated over 25 years is 2.14 per cent.
The next best deal or the best for homeowners with a lower borrowing requirement is the Yorkshire’s two-year fix. The rate is 2.49 per cent but the fee is just £995. Again, the LTV is 75 per cent.
The Woolwich has a deal that is also nearly on a par with the Yorkshires. Their two- year fixed rate mortgage best-buy charges 2.58 per cent and has an £800 arrangement fee. The LTV is 70 per cent.
The Chelsea Building Society, who recently took their ten-year fix at 3.99 per cent off the market, has a good deal on a two-year fix. It comes with a rate of 2.39 per cent for those with a 70 per cent LTV and a fee of £1,495.
Santander has a two-year fixed rate mortgage at a lower rate, just 2.35, but like the offering from Leeds Building society, it comes with a £1,995 fee. You need a 40 per cent deposit to get this mortgage.
First Direct have a good deal if you have a LTV of 65 per cent. Their two-year fixed rate mortgage deal charges 2.65 per cent interest and has a fee of £1,495.
Skipton Building Society comes in at number seven on our list of top ten best-buy two-year fixed rate mortgage deals. Their product charges 2.78 per cent and has total fees of £995. The LTV is 75 per cent.
Northern Rock has a good deal with a very low fee. The rate is 2.99 per cent but the fee is just £99, making this one to consider. You need a 30 per cent deposit for this one.
HSBC’s two-year fix also comes with a rate of 2.99 per cent and is available to those with a 70 per cent LTV, but this mortgage deal has fees of £595 attached.
Finally, Hanley Economic has a two-year fixed rate mortgage available at 3.09 per cent with a fee of £500. This one is a better bet for those with a smaller deposit as the required LTV is just 80 per cent.
First-time buyers
One of the best deals available for first-time buyers comes from Chelsea Building Society. They offer a deal at 4.09 per cent for borrowers with a ten per cent deposit. It comes with a fee of £1,495.
Whilst base rate is unlikely to change much over the next 18 months, meaning that great deals on tracker and variable mortgages will remain available to many homeowners, borrowers who would like to opt for some security now have some excellent deals available.
The fact is the gap between the best tracker rates and the top fixed-rate deals has rarely been narrower. But the question is how long will that remain so?
Most experts believe that because of the Libor rate rise and the ongoing euro debt crisis affecting lenders ability to borrow themselves, that these low rates may rise as soon as the end of the year.
Another potential disadvantage to fixing now is the possibility that the Bank of England could reduce base rate by a further 0.25 per cent. This is unlikely but while the economy continues to struggle it remains a possibility.
Use the Myfinances.co.uk comparison tables to find the best deal on a new mortgage
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