Money


Fixed-rate mortgage costs drop

11:52am Monday 23rd November 2009

The average cost of a two-year fixed-rate mortgage has fallen below 5% The average cost of a two-year fixed-rate mortgage has fallen below 5%

The average cost of a two-year fixed-rate mortgage has fallen below 5%

The average cost of a two-year fixed-rate mortgage has fallen below 5%




The average cost of a two-year fixed-rate mortgage has fallen below 5% for the first time in five months, research shows.

People who want to fix their mortgage rate for two years are now typically paying 4.99%, according to financial information group Moneyfacts.co.uk.

The group said it was the first time average rates on a two-year fixed-rate mortgage had been less than 5% since June 23.

The cost of the deals rose sharply during July to peak at 5.21% as lenders responded to rising swap rates, upon which the mortgages are partially based.

But they were less quick to react to subsequent falls in swap rates, instead increasing the margins they charge on the deals.

The average margin charged on a two-year fixed-rate mortgage is now 3.21%, up from 2.72% in June.

But there has been a flurry of lenders cutting their rates in recent weeks as competition slowly begins to return to the market.

Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "Borrowers are finally starting to see more positive news coming out of the mortgage market.

"Falling rates on popular two-year fixed-rate mortgages, occurring against a backdrop of lenders raising the maximum loan to value ratios on their most competitive deals suggests that competition is increasing.

"Lenders have become accustomed to the post banking collapse world and appear to finally be relaxing their credit criteria while remaining within a regulated frame work."


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