fbpx

Average 2-year fix falls below 3pc

Robyn Hall

March 31, 2015

At the start of March 2015 the average stood at 3.06%, but by 30 March it had dropped to 2.98%.

The drop in rates is due to increased competition and falling SWAP rates, which makes it cheaper for banks and building societies to borrow money to lend out in mortgages.

SWAP rates are falling as speculation increases that base rate will remain at 0.50% for a long time, or that it may even be cut due to the 0% inflation the UK is currently experiencing.

The average 2-year fixed rate is taken from all the different LTVs in the two-year sector, and Moneyfacts has found that it is the higher LTVs that are benefitting most from the drop in average rates.

Today there are 1,174 2-year fixed rate deals on the market.

Sylvia Waycot, editor at Moneyfacts.co.uk, said: “The drop to zero inflation has resulted in the constant speculation of a Bank of England base rate rise being kicked to the kerb for the time being. Removing that concern has made it easier for lenders to drop some rates in order to be more competitive.

“As remortgage lending figures are still depressed due to many borrowers being happy on current standard variable rates, the competition for the limited number of new borrowers is intense, hence the fall in rates for higher LTVs.

“A happy consequence of zero inflation is that those on a higher LTV become less of a lending risk because the money in their pocket stretches further, making the risk of tipping into mortgage arrears less likely. Lenders normally factor this risk into the overall rate charged, so as the risk has lessened so has the rate.

“We sit on a virtual see-saw with inflation balanced at the other end: next month inflation could rise or fall, and therefore two-year fixed mortgage rates could just as easily change, too.”


Sign up to our daily email