Record low interest rates have already been seen in two and five year fixed rate mortgage plans, but recent figures show that it is four year fixed rate plans that have seen the starkest drop – with Chelsea Building Society’s (CBS) latest offering coming with a rate of just 1.84%.
This news follows swiftly on from the recently reported cheapest two year fix available from YBS with a rate of 1.07%, with experts predicting a drop to below 1% any time soon.
So why are we seeing such a consistent and dramatic drop in rates for fixed term mortgages?
There are a variety of factors at play here, starting with a low Bank of England interest rate, which currently stands at 0.5%, with a hike up to 0.75% not expected until May 2016, a full three months later than initially planned.
Also the ever increasing number of products on the market boosts competition and naturally leads to competitive prices. To put this in perspective – there are now more than twice the number of two and five year fixed rate mortgages available than there were five years ago. These figures have been rising steadily and look to continue doing so.
This, coupled with ever decreasing costs of wholesale funding, has forced UK mortgage rates in general down at a time when they were expected to rise sooner than ever.
The anxiety over potential rate rises on the horizon however is still very much present, and so more and more people are opting for fixed rate deals while rates stay low in an effort to ensure that they can take advantage of these rates for as long as possible. The resultant completion between lenders has led to a game of one-upmanship that the consumer can most certainly enjoy the results of.
The particularly steep drop in rates for four year fixed rate plans comes as something of a surprise, given the previously general trend towards pushing two and five year fixes, leaving the middle ground a little overlooked.
This all looks set to change though thanks to Chelsea Building Society’s latest product. Customers looking for the lowest rates will still opt for two year plans, but those looking for absolute security more often than not tend to go for five year fixes. But now, with four year fixed rates dropping below 2%, for a slightly shorter period of time – it looks like a perfect middle ground has emerged.
For more information on mortgage finance view our helpful Guide to Mortgages which explains everything you need to know from how much to borrow to the mortgage lending process. Alternatively speak to one of our experts today.