Increased competition in mortgage market

Average interest rates charged on a two-year fixed-rate deal for a borrower with a 25% deposit dropped to 3.8% this month.

Lenders have been under increasing pressure to cut their rates because the Bank of England has kept the base rate at a record low of just 0.5% since March 2009. With the base rate expected to stay low, all signs point towards improved affordability for those wishing to buy a property.

Alison Beech, business relationship director, Spicerhaart commented: “May’s record-low fixed-rate mortgage deals are a positive thing for the housing industry as a whole, but are unlikely to benefit first time buyers.

“Fixed rate mortgages are an attractive option for borrowers who want to be certain of their payments, or who fear interest rates may start to rise. Borrowers with little equity or small deposits are likely to be the ones who benefit the most from a low rate fixed term mortgage, but with 25% of the properties’ value required to secure the loan, for many hoping to get a first foot on the ladder this will still be out of reach.

“Only borrowers with significant deposits or those looking to remortgage will be in a position to take advantage of these historically low mortgage rates.”