With interest rates remaining low lenders are lowering fixed rate mortgages even for homebuyers with only small deposits.
The Bank of England has maintained the current level of interest rates at 0.5% lenders are becoming more competitive pushing the cost of borrowing down with fixed rate mortgages from 2.29% for five years from Barclays.
Lenders such as Barclays, First Direct and TSB are introducing new low interest on mortgages with First Direct leading the way with a 10 year fixed rate mortgage at 2.89% ahead of Santander and Barclays at 2.94%.
These deals are for those with the highest deposits of 40% and best for remortgage buyers or home movers although lenders are now reducing rates for those with smaller deposits.
Lower rates for small deposits
For first time buyers the lenders are now more competitive with 90% loan to values. So with a 10% deposit rates for a five year fixed rate mortgage are 4.05% and a two year fixed rate from 2.49%.
There are longer term 10 year fixed rate mortgages such as from TSB offering 5.69% and a loan to value of 95% targeting mainly first time buyers.
With a 5% deposit homeowners can have the security of locking in a rate for the next ten years so they know exactly what their monthly mortgage costs will be, even when interest rates rise.
If you have a bigger deposit the rates are much lower. Nationwide and First Direct are both offering a 2.89% 10 year fixed rate mortgage although you would need a 30% deposit and charged a £995 arrangement fee.
The equity release mortgage buyer can secure fixed rates typically from 5.8% upwards without any evidence of earnings, important for borrowers with only pension income.
Interest rates to remain low
The interest rate you pay for your mortgage depends on the Bank of England base rate which has remained at the current 0.5% since 2009 and is influenced by inflation.
Headline inflation is reflected in the Consumer Price Index (CPI). This is based on the cost of goods that are falling in value, such as food and petrol prices and this is likely to fall to close to 0% inflation.
Experts from the Centre for Economics and Business Research (CEBR) are predicting the UK to experience a period of deflation in March. If this is the case it is unlikely the Bank of England will raise rates, possibly well into 2016.
This means first time buyers, home movers, remortgage buyers and buy-to-let landlords will benefit from low mortgage for another year at least.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage cost calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even reduce inheritance tax owed by your beneficiaries.
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