A two-year fix at 1.39%! Mortgage rates hit a new record low but beware the big fees
Mortgages rates have hit a new low after First Direct launched a two-year fix at 1.39 per cent.
The lender is the latest to make cuts to its range as an autumn price war has gripped the market after a lull in over spring and summer.
But you will need a big 35 per cent deposit to put down and be willing to pay a hefty fee of almost £2,000.
Choice: Borrowers now have a decent range of mortgages to choose from when buying a property
First Direct’s two-year fixed rate at 1.39 per cent would deliver monthly payments of £592 on a 25-year £150,000 mortgage and including the £1,950 arrangement fee it would carry a total cost of £16,162 over two years.
A borrower with the same mortgage amount on a typical lender’s standard variable rate at 5 per cent would pay £792 a month and face a total cost of £19,002 over the two years.
Competition has intensified in the mortgage market over the past few weeks, giving borrowers a wider choice of cheap mortgages
This has continued a trend that has seen rates pushed down since summer, especially among two-year fixes. Lenders have cut rates as they approach their end-of-year deadlines and the chances of an interest rate rise soon fade.
But while the rates are low, the fees have remained high.
This means you have to consider the total cost of the deal, and work out whether you may be better off ditching the idea of a two-year fix and going for a longer term deal at a higher rate. This will give longer-term security and mean you are not hit with high mortgage fees again after just a couple of years when you come to remortgage.
|Lowest two-year fixed rates|
|10% Deposit (90% LTV)||3.54%||3.44%||2.95%|
|15% Deposit (85% LTV)||2.85%||2.74%||2.64%|
|20% Deposit (80% LTV)||2.29%||2.34%||2.25%|
|25% Deposit (75% LTV)||1.89%||1.84%||1.74%|
|30% Deposit (70% LTV)||1.99%||2.09%||1.89%|
|35% Deposit (65% LTV)||1.64%||1.55%||1.55%|
|40% Deposit (60% LTV)||1.48%||1.49%||1.49%|
|Lowest five-year fixed rates|
|10% Deposit (90% LTV)||4.39%||4.24%||4.09%|
|15% Deposit (85% LTV)||3.75%||3.64%||3.64%|
|20% Deposit (80% LTV)||3.39%||3.39%||3.19%|
|25% Deposit (75% LTV)||2.69%||2.99%||2.89%|
|30% Deposit (70% LTV)||2.94%||2.99%||2.89%|
|35% Deposit (65% LTV)||2.69%||2.85%||2.59%|
|40% Deposit (60% LTV)||2.69%||2.79%||2.75%|
First Direct is offering a two-year fixed rate at 1.39 per cent with a £1,950 fee.
A 25-year £150,000 mortgage would cost £592 a month or £16,162 over two years.
The high fee actually lets this mortgage down and makes the overall deal more expensive than it looks.
You could instead go for Yorkshire Building Society’s higher rate of 1.47 per cent with a lower £975 fee.
A 25-year £150,000 mortgage would have monthly repayments of £597 and cost less than the First Direct deal overall at £15,322, saving you more than £800 over the two years.
First Direct is also trying to appeal for those looking for a slightly longer fix with a three-year fixed rate at 2.19 per cent with a £1,950 fee.
A 25-year £150,000 mortgage would cost £649 a month and £25,340 over three years.
This is an attractive rate, but again can be beaten by others with a lower fee.
Principality building society has a three-year fixed rate at 2.20 per cent with a £1,494 fee.
The 25-year £150,000 mortgage would cost £650 a month and £24,911 over three years, saving you £429 in comparison with First Direct.
If you wanted to fix your mortgage for even longer, West Brom building society has a five-year rate at 2.79 per cent with a £599 fee.
Your monthly repayments would be just a bit more each month at £695 a month and the total cost would be £42,301. But you would pay a smaller fee than you would for a two or three-year fixed rate.