The top ten fixed rate mortgage deals for 2012

In this feature we take a look at the top ten fixed rate mortgage deals for borrowers with different levels of equity.

First-time buyers

We took a look at how the mortgage landscape has changed for first-time buyers earlier this week and concluded that since the credit crunch it has become more difficult to secure your first mortgage.

This is because the average deposit required has doubled from ten per cent of the purchase price to 20 per cent and lenders have tightened up on their borrowing rules.

But, for the wider range of homebuyers, including borrowers who are re-mortgaging with plenty of equity, new initiatives such as the Bank of England’s Funding for Lending Scheme (FLS) has led to some terrific new fixed rate products coming on to the market.

Base rate

With base rate expected to remain at 0.50 per cent for at least another year and quite possibly longer, many borrowers will be happy to remain on their lenders tracker deals or standard variable rate (SVR).

However, at some point base rate will rise and judging when this will be will inform you on when might be the sensible time to go for a fixed rate mortgage deal.

When should I fix?

Depending on your attitude to risk, you may look to fix straight away. When budgets are tight, some homeowners prefer to have the security of what they are going to pay each month.

What’s more for many borrowers, if they have sufficient equity, there are some fixed rate products that charge almost as low an interest rate as trackers. This is especially true for two-year deals.

I have recently renewed my mortgage and what was foremost in my mind was that I felt the competitive five-year fixed rate deals that are around now, might not be in two or three years time.

Personal choice

So, although I might pay slightly more for the first two years than if I had taken out a tracker deal or a two-year fix, I reckon I’ll save money on the final three years by being able to secure a lower rate now, than I think I would then.

Of course, there are no guarantees, and this is a personal choice. Base rate might stay put for longer than two years, but in such an uncertain economic landscape as we have experienced in the last five years, it could go up sharply.

My other reason for choosing a five-year fix is that I do not want to pay mortgage fees or go through the whole process of re-mortgaging very often and after my experience in doing this over the summer, I feel vindicated in making this decision….. But that is a story for another time!

So, without further ado, let’s take a look at the top ten fixed rate mortgage deals around for borrowers with different loan-to-value (LTV) ratios.

I will look at the best deals for borrowers from first-time buyers to those with 40 per cent equity and include both short and medium term fixed rate products for most types of borrowers because as noted before, the length of time you choose to take out a fixed rate mortgage is very much a personal choice.

First-time buyer mortgages

NatWest - Under the NewBuy scheme, NatWest has a two-year fixed rate deal for those with just a five per cent deposit at 4.49 per cent with no fee.

Ten per cent deposit mortgages

First Direct – The best current two-year fixed rate deal for those with a ten per cent deposit is from First Direct and charges 4.29 per cent, with a £999 fee. An early repayment charge (ERC) is payable for two years.

HSBC – The best five-year fixed rate mortgage deal at 4.89 per cent. The fee is relatively low at £599 and only a ten per cent deposit is required. There is no ERC and it is fee free for purchase applications.

20 per cent deposit

Halifax – The best two-year fixed rate mortgage deal for borrowers with a 20 per cent deposit comes from the Halifax. It charges a rate of 3.94 per cent and has no fee. The product is available to first-time buyers only

NatWest – The best five-year deal for borrowers with an 80 per cent LTV comes from NatWest, but unfortunately it is only available for existing borrowers. It charges 4.89 per cent and comes with no fee.

25 per cent deposit

The Yorkshire Bank offers the best two year deal for borrowers with an LTV ratio of 25 per cent. The rate is just 2.84 per cent and the fee is £995, An ERC is applicable through the two-year term.

The bank offers a similar deal for three years at a rate of 3.04 per cent with the same fee and ERC details.

Leeds Building Society has the next best three-year fixed rate deal at 3.25 per cent with a fee of £999. An ERC is payable for three years and you have to take out the lenders home insurance to qualify for this product.

30 per cent deposit

Northern Rock offers a three-year fixed rate mortgage at 3.25 per cent for borrowers with a 30 per cent deposit. The fee is £1,094 and an ERC applies for the whole term of the mortgage.

40 per cent deposit

Here we get to the vest best deals, reserved for those with the most equity that the banks believe are low-risk borrowers.

At this level of borrowing it seems clear that opting for a longer term fix is the best bet because the differences in rates between the top two-year fixed rate deals and the best five-year fixes is not that great at the moment, and, in most instances, the fees work out proportionately cheaper.

HSBC – The best two-year fix is on offer from HSBC and charges 2.64 per cent. It comes with a hefty £1,999 fee and requires a 40 per cent deposit. An ERC is payable for two years.

Santander – The cheapest five-year fixed rate mortgage deal is from Santander but only available to current account customers or existing mortgage customers. It charges just 2.99 per cent and the fee is less than HSBC’s at £1,495. A 40 per cent deposit is required and an ERC is payable for five years.