2-year fixed mortgages fall for now
Those borrowing 60% will save on average £2,515 by fixing today compared to March 2012.
However, the average rate across all two-year fixed rate mortgages has risen month-on-month since the withdrawal of the Funding for Lending Scheme in December 2013.
True cost takes into account rates, fees and discounts, resulting in the actual monetary amount the mortgage will cost over the term.
Sylvia Waycot, editor at Moneyfacts.co.uk, said: “The true cost measurement is the only one that really counts as it shows exactly how much will come out of the borrowers pocket over the term and for once it is good news, today’s average 2-year fixed is costing over £2,000 less than a similar mortgage in 2012.
“The 2-year fixed is traditionally the ‘option of choice’ as it offers a safe harbour from interest rate rises but at the same time does not lock the borrower down so tight that they can’t enjoy rate falls relatively quickly.”
There are 1,242 2-year fixed rate mortgages on the market today, up from 921 in March 2012. The 35% increase stems from competition stirred up by initiatives such as Help to Buy.
2-year fixed rates are now rising however, as in January 2014 the average stood at 3.52%, before increasing to 3.59% and 3.61% in February and March.
Waycot added: “The withdrawal of the Funding for Lending scheme means that banks have to self-fund mortgages and money markets jitter over just when the Bank of England will raise rates.”