Only 7pc better off with lower rates
Average 2-year tracker rates have hit a low of 2.50% in February 2013, 0.81% lower than in March 2009.
Average rates on 2 and 3-year fixed rate mortgages have also declined following base rate cut, with rates falling to record lows of 2.34% for a 2-year fix, and 2.89% for a 3-year fix. This is a drop of 1.45% and 1.63% respectively since March 2009.
Clare Francis, mortgage expert at MoneySupermarket, said: “On the face of it, borrowers are the winners of the low interest rate environment, with mortgage rates falling to an all-time low and the number of products available increasing by 37% over the last seven months as a result of the Bank of England’s Funding for Lending Scheme.
Despite the superficial improvement many borrowers have been locked out of the market for much of the credit crunch due to falling house prices and the reluctance of lenders to lend, particularly to those with smaller deposits.
Francis said: “Those borrowers fortunate enough to have sizeable equity in their homes are the ones who have been able to take advantage of lower mortgage rates over the last four years. It is only since the introduction of the FLS have we seen the market opening up for borrowers as lenders open their books to those with smaller deposits.
“Average mortgage rates have come down as a result, and over recent weeks we have seen average rates for fixed rate products hit an all-time low.”
However Francis warned that borrowers must be careful when opting for products with low headline rates.
Francis said: “Some deals have arrangement fees of up to £2,000 and these are often masked by a low headline rate. The impact of the fee on the total cost of the mortgage may mean it’s actually cheaper to take a loan with a slightly higher rate but lower set-up costs.
“Borrowers should make sure they factor this in when comparing mortgage deals.”