The cost of five year mortgages has reduced in the last year and now could be the time to fix this rate and inflation proof your budget.
Research from financial data provider Moneyfacts shows the cost of a five year fixed rate mortgage has reduced by 0.32% over the year.
For first time buyers, home movers and remortgage buyers now could be the time to secure a long-term deal to inflation proof your budget and fix your outgoings.
The Moneyfacts data shows a 90% loan to value (LTV) mortgage for a 5-year fixed rate cost 3.69% in April 2016 and this has reduced to 3.37% in April 2017.
Secure your mortgage repayments
Since the Brexit vote Inflation was expected to rise and is now above the Bank of England target of 2% for the first time in four years.
We are already seeing the cost of living rise and one way of protecting your mortgage payments is to have a fixed term deal.
The cost of the 5-year fixed rate mortgage has reduced and the following table from Moneyfacts shows the change over the last year with different LTVs.
| Loan amount | Apr-2016 |
Oct-2016 |
Apr-2017 |
|---|---|---|---|
| 60% LTV | 2.60% | 2.46% | 2.39% |
| 75% LTV | 2.89% | 2.73% | 2.57% |
| 90% LTV | 3.69% | 3.53% | 3.37% |
The best deals are offered to homeowners with the largest deposit of 40% or more with a fixed rate of 2.39% and if you only have a 10% deposit the rate is higher at 3.37%.
Lower mortgage rates benefit buy-to-let investors as they can remortgage to reduce the cost of interest repayments to lenders.
Charlotte Nelson, finance expert at Moneyfacts said, the five-year fixed rate market has been improving for some time as lenders compete offering a diverse mortgage range.
As a result rates to fall as providers compete to be the lowest in the market with average rates for a 90% LTV reducing from 4.41% to 3.37% in two years.
This means first time buyers, home movers and remortgage buyers are paying an impressive 1.04% less.
If you are a remortgage buyer currently on your lenders standard variable rate, to reduce costs you can switch to a new mortgage deal helping you with lower monthly repayments.
Bigger savings for other borrowers
Homeowners coming to an end of a preferential rate can reduce their costs with the low 5-year fixed rate and know their monthly payments will remain unchanged, even if the Bank of England increases based rates.
The savings are even greater if you are currently on your lender’s standard variable rate (SVR) which now averages 4.56%
From Moneyfacts research based on a £200,000 mortgage over a 25-year term, a borrower with a five-year fixed rate at 60% LTV of 2.39% would be £232.30 a month better off or £2,787.60 per year.
Other types of long term mortgages are available for older homeowners that are also at all time low rates.
For homeowners aged 55 to 85 that have accumulated considerable value in their properties, accessing this wealth is possible using a lifetime mortgage.
The equity release mortgage buyer can secure fixed rates typically from 4.0% upwards without any evidence of earnings, important for borrowers with only pension income.
The funds can be used for any purpose, such as to maintain their lifestyle, holidays or home improvement or giving to a family member.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth for home or garden improvements and holidays.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, property value tracker chart and mortgage monthly costs calculator.
At LCM our mortgage brokers can provide advice if you are a first time buyer, moving home, want to remortgage your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.
