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| Fixed mortgage rates at 'lowest ever levels' – even for first-time buyers | Fixed mortgage rates at 'lowest ever levels' – even for first-time buyers |
| (25 days later) | |
| Mortgage rates across the board have fallen to their lowest level in 24 years, even for first-time buyers with only a 10% deposit. | Mortgage rates across the board have fallen to their lowest level in 24 years, even for first-time buyers with only a 10% deposit. |
| Rates have been dropping gradually since the government launched the Funding for Lending scheme, designed to encourage banks to lend more, in August 2012. But in recent weeks a deluge of "best ever" deals means borrowers can now access the lowest two-, three- and five-year fixed rates since 1989 when fixed-rate home loans became available, according to data provider Moneyfacts. | Rates have been dropping gradually since the government launched the Funding for Lending scheme, designed to encourage banks to lend more, in August 2012. But in recent weeks a deluge of "best ever" deals means borrowers can now access the lowest two-, three- and five-year fixed rates since 1989 when fixed-rate home loans became available, according to data provider Moneyfacts. |
| A 1.89% two-year fixed rate from Chelsea building society, launched on 8 February, currently tops the best buys for those wanting a loan equivalent to 60% or less of the value of their property. This is the lowest rate on Moneyfacts' records. | A 1.89% two-year fixed rate from Chelsea building society, launched on 8 February, currently tops the best buys for those wanting a loan equivalent to 60% or less of the value of their property. This is the lowest rate on Moneyfacts' records. |
| For borrowers with a smaller 10% deposit, the Loughborough building society is offering a 4.09% rate fixed for three years (with a £499 fee) – also the lowest 90% loan-to-value (LTV) three-year fixed rate on record. | For borrowers with a smaller 10% deposit, the Loughborough building society is offering a 4.09% rate fixed for three years (with a £499 fee) – also the lowest 90% loan-to-value (LTV) three-year fixed rate on record. |
| First-time buyers wanting to fix to the more popular two-year period can now get a rate of 3.69% on a 90% LTV loan with the Chelsea building society. This is the lowest since September 2007. | First-time buyers wanting to fix to the more popular two-year period can now get a rate of 3.69% on a 90% LTV loan with the Chelsea building society. This is the lowest since September 2007. |
| "To put the current rates into context, if you had opted for a two-year fixed in June 1989 you would have paid an average of 12.83% (the least competitive rate was a breath stopping 13.2%)," said Sylvia Waycot, editor at Moneyfacts. "A five-year fix averaged out at 12.85%." | "To put the current rates into context, if you had opted for a two-year fixed in June 1989 you would have paid an average of 12.83% (the least competitive rate was a breath stopping 13.2%)," said Sylvia Waycot, editor at Moneyfacts. "A five-year fix averaged out at 12.85%." |
| She added: "Recent criticism levied at banks was that they were offering the best mortgage deals in the less risky 60% LTV tier. It is good news on that front, as some very attractive higher LTV loans are at last entering the market." | She added: "Recent criticism levied at banks was that they were offering the best mortgage deals in the less risky 60% LTV tier. It is good news on that front, as some very attractive higher LTV loans are at last entering the market." |
| However, the improved rates come against a backdrop of much tougher lending criteria, as well as higher house prices that mean borrowers need a bigger deposit. | However, the improved rates come against a backdrop of much tougher lending criteria, as well as higher house prices that mean borrowers need a bigger deposit. |
| "You will still need to have a clean credit record, income sufficient to not only pay today's mortgage rate but also potential future increases, and of course the stickler for most, the deposit," Waycot said. | "You will still need to have a clean credit record, income sufficient to not only pay today's mortgage rate but also potential future increases, and of course the stickler for most, the deposit," Waycot said. |
| Nevertheless, lower rates appear to be helping more first-time buyers to buy a home. The number of first-timers entering the housing market reached 216,000 in 2012, the highest in five years, according to figures from the Council of Mortgage Lenders (CML). | Nevertheless, lower rates appear to be helping more first-time buyers to buy a home. The number of first-timers entering the housing market reached 216,000 in 2012, the highest in five years, according to figures from the Council of Mortgage Lenders (CML). |
| Figures from HSBC show it provided £16.4bn in gross new mortgage lending in 2012, a 24% increase on 2011. The loans went to 177,000 borrowers, including 40,500 first-time buyers. | Figures from HSBC show it provided £16.4bn in gross new mortgage lending in 2012, a 24% increase on 2011. The loans went to 177,000 borrowers, including 40,500 first-time buyers. |
| However, the beginning of this year appears to have been more subdued. The CML said total gross mortgage lending declined to £10.4bn in January. This was 9% lower than December 2012's figure of £11.4bn and a 3% fall from £10.7bn in January 2012. | However, the beginning of this year appears to have been more subdued. The CML said total gross mortgage lending declined to £10.4bn in January. This was 9% lower than December 2012's figure of £11.4bn and a 3% fall from £10.7bn in January 2012. |
| "A worsening in the outlook for inflation presents a greater headwind, but we still expect the Funding for Lending scheme to lift activity over coming months," said CML market and data analyst Caroline Purdey. | "A worsening in the outlook for inflation presents a greater headwind, but we still expect the Funding for Lending scheme to lift activity over coming months," said CML market and data analyst Caroline Purdey. |
| Top mortgages | Top mortgages |
| Chelsea Building Society | Chelsea Building Society |
| Yorkshire BS | Yorkshire BS |
| Yorkshire BS | |
| Provided by London & Country for the Guardian | Provided by London & Country for the Guardian |