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Mortgage Price War

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Mortgage Advisors in Doncaster have been talking about the slashing rates on the five-year deals to some of their lowest ever levels due to the rate cut happened this week.

Mortgage Advisors in Doncaster have been talking about the slashing rates on the five-year deals to some of their lowest ever levels due to the rate cut happened this week. While the average five-year fix currently sits at 2.60%, homeowners or First-Time Buyers with a bigger deposit now have access to several five-year fixes below 1.50% for the first time in several years.

This is the lowest the rates have been since Banks across the country briefly introduced a shock 1.29% and five-year fix in 2017, and the first-time multiple lenders have offered five-year fixed rates this low. Stephen Kerrigan, Mortgage Advisor mentions that TSB currently have the best five-year fix on offer at 1.44% with a £1,494 fee up to 60% loan-to-value.

By comparison, the very cheapest deal currently on the market is NatWest’s 1.19 per cent two-year fix, just 0.25 per cent cheaper. On a £250,000 mortgage taken over 25 years TSB's deal would result in monthly payments of just £993.

Why are they cutting the Five-Year Fixes?

Virgin Money and Skipton both offer similar deals at 1.46 per cent with fees of £1,495, with the former's up to 65 per cent loan-to-value and the latter’s up to 60 per cent loan-to-value. While other banks’ only other lender is to currently offer a Five-Year fix below 1.50%, with a 1.49% deal up to 60% loan-to-value with a fee of £1,048.

With a smaller fee, this deal is only marginally more expensive than TSB’s despite its higher rate. On a £250,000 mortgage taken over 25 years it would result in monthly payments of £999. Stephen Kerrigan of Mortgages Remortgages in Doncaster says:

“There is potential speculation of a base rate cut early next year, which could drive rates even lower. As borrowers look to fix for longer, seeking peace of mind over monthly repayments, lenders are making five and 10-year deals more attractive to tempt new customers.”

That’s not the only factor at play. What are known as ‘swap’ rates, the rates upon lenders price their fixed-rate deals, have been consistently low for some time, with five-year money being cheaper than two-year money at one stage.

Stephen Kerrigan says: “This is due to the fact that the global economy has weakened and coupled with the Uncertainty of Brexit. The Bank of England has indicated that the next interest rate change may be cut rather than a rise.”

This has allowed lenders to offer cheaper fixed mortgage products, which has been exacerbated by the ongoing competitive nature of the mortgage market at present. Lenders are battling it out to both end the year of 2019 well and start 2020 with a bang and new business. There have been some signs in recent months that the price war between mortgage lenders has started ton take its toll, however, some lenders have left the property market this year, most of which have cited pricing pressures. Even the bigger lenders have been affected, as evidence by Mortgages Remortgages ∙ Fee Free Mortgage Advisor, which last week reported that a hit of its profits was a result of low mortgage rates, which again was spurred by market competition.

“Consumers have also wised up to the fact that fixing in for a longer time and managing their affordability is a good thing to do in a low rate environment.” Kerrigan added. As a result of all of these consumers are in a great position of seeing five-year fixes go from the sublime to the ridiculous and many are looking at finally buying that new home, making that move or Remortgaging to a much better rate as they know these products will not last for ever. 

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