Mortgage rates reach record lows

10th February 2015

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Mortgage rates have dropped to record lows for both home owners and buy-to-let borrowers, new figures reveal.

Both buy-to-let and residential mortgage rates have been falling, according to research by Moneyfacts.co.uk, the comparison website.

Two-year fixed rates for residential borrowers with a 40% deposit are available at the lowest ever rate of 1.19%, while for those with a smaller deposit of 15%, rates of 2.25% are also the cheapest ever reported by the comparison website.

Today’s buy-to-let average of 3.82%, is the lowest ever and compares to 4.22% a year ago and 5.03% three years ago in February 2012.

Moneyfacts.co.uk said that falling rates are the result of thriving competition in the mortgage market. This time last year there were 2,662 deals for borrowers looking for loan-to-values (LTVs) of 75-100% but now there are to 2,943. It found that the number of buy-to-let deals has increased from 757 to 811 in just a month.

As lenders loosen up after years of being risk adverse, the need to restrict borrowing to only those with high deposits has lessened and the number of deals at 70% LTV and below has declined from 1,021 to 845.

The battle to own the fixed rate market is set to continue and February has started with amazing rates, with the majority of deals at the lowest prices ever recorded.

Sylvia Waycot, editor at Moneyfacts.co.uk, said: “When you consider how dire savings rates are it is hardly surprising that BTL is proving popular with investors, and this is likely to increase once the rules relaxing the drawdown of pension pots in April come to fruition.

“Having had several years of the bank door being firmly shut to only the richest of borrowers, doors appear to not only be open but actively entice you in off the street with offers of fantastic rates.”

Commenting on the Bank of England’s average interest rate data, which was also released today, Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Looking at the Bank’s latest quoted interest rates, there is no sign of any slowdown whatsoever in the mortgage price war. Lenders have begun the year with a strong appetite for growth, and newcomers are going head-to-head with established names to launch attractive new deals.

 “Rising competition is pushing pricing to new lows, and it means consumers can choose from record-breaking fixed rate deals regardless of whether they have a 5%, 10% or 25% deposit. There has also been a seismic shift in the average two year variable rate at 75% loan-to-value, which has fallen by 112 basis points over the last year to 1.64%: a price cut of more than 40%.

“The next six months are shaping up to be the best-ever window to secure a low interest rate if you are looking to buy or remortgage. Today’s prices have never been bettered in modern times and given that a base rate rise is inevitable at some point, it is unlikely they will be surpassed in the years ahead.” 

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