Number of Home Loans Under 1% Shrinks to Just One

It’s official – the era of competitive mortgage rates under 1% is now over. The country had enjoyed a period of around 18 months where there were several products available at either just above 1% or below it. This was offered as recently as September, when would-be home buyers could apply for a 0.99% two-year tracker mortgage with Skipton Building Society. The same deal was also available at HSBC.

However, the recent base rate rise of 0.25% has now been applied to both these deals, taking them to 1.24% instead. While this is not a massive change in terms of the overall interest rate now offered on those products, it has seen the end of the 18-month golden period of super-low interest rates on mortgages.

“To be expected”

“The rate rises we’ve seen over the last week or so are to be expected,” confirmed Darren Pescod, CEO of The Mortgage Broker Limited. “The Bank of England has been warning of a potential rate rise for some months now. Unfortunately, the warnings had been issued for a while and had not come to fruition until now. That might mean some were caught off-guard when it did happen.

“With that said, it is important to remember mortgage rates are still very low compared to rates we have seen in the past. There are still plenty of good deals out there.”

One lone sub-1% mortgage remains

The last mortgage standing, so to speak, that sits below the magic 1% mark is the 0.99% deal discounted for two years at Furness Building Society. This is connected to its 5.29% standard variable rate. There are suspicions this deal may not be around for much longer, given the upward movement in interest rates across many other banks and building societies.

The average fixed-rate deals are still lower today than they were five years ago

While the base rate has risen for the first time in what seems like an age, mortgage holders should not be too nervous. Moreover, those looking to fix a deal now can still get far preferable rates today than were available just five years ago.

Statistics reveal the average two-year fixed rate mortgage today is just 2.34%. This compares sharply with the average of 4.37% in November 2012. Meanwhile, someone looking for a three-year fix today can expect an average of around 2.60%. This is over 2% lower than the average seen in 2012, which was 4.71%. And finally, today’s average fixed rate deal for five years is 2.86%, compared with 4.47% in November 2012.

“There are still some very good deals on the market if people are prepared to look around for them,” Darren Pescod continued. “Anyone who is looking for a fixed-rate deal will still have some good options to choose from, despite the base rate rise. Indeed, switching to a good deal now could protect them from further potential rises in the future – something the Bank of England has already highlighted could happen.”

Published on 23 July 2020

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