Cheapest fixed mortgage deals dip below 5% – the lowest rate in a month
Homebuyers and those looking to remortgage can now take out a five-year fixed deal that charges less than 5% interest. It's the lowest shorter-term fixed rate for new customers we've seen in a month and suggests rates have peaked following recent turbulence. Below we explain how the new deal works and how it compares.
Mortgage rates have rocketed recently as a result of uncertainty caused by the Government's mini-budget in September. However, after Chancellor Jeremy Hunt reversed many of the policies which shook the markets, including cancelling tax cuts and other spending plans, the factors that influence fixed mortgage rates have now stabilised.
Just last week we reported that some brokers were predicting that the cheapest rates could soon fall below 5% – though the launch of Platform's 4.89% fix has happened sooner than most expected.
How Platform's new sub-5% mortgage works
This particular Platform deal (Platform is the lending arm of Co-op Bank) is available to those looking to purchase a property or remortgage. It's available up to 60% loan-to-value (LTV – the proportion of the property's value you're borrowing as a mortgage) but comes with an expensive product fee of £1,499 (meaning it might not necessarily be the cheapest deal on the market).
You can also get a 4.94% five-year fix from Platform with a 75% LTV, which again comes with a £1,499 fee. Plus, it has a five-year fix at 4.84% with a £1,999 fee, though this is only for those borrowing at least £400,000.
First Direct did launch a 4.99% fix last week, but this was a longer 10-year deal. Nationwide also currently offers a two-year fix at 4.84% and a five-year fix at 4.64%, but these deals are restricted to existing Nationwide borrowers only.
Why fixed rates may continue to fall – albeit slowly
For now, Platform's five-year fix might be a bit of an outlier. David Hollingworth, broker at London & Country, told MoneySavingExpert.com that with lenders having to work through huge backlogs, we are more likely to see a "gradual easing" of rates rather than a dramatic fall.
Average rates on two-year and five-year fixes were 6.5% and 6.36% on 26 October, but now these figures have dropped slightly to 6.35% and 6.12% respectively.
However, Hollingworth added that, depending on the reaction of the financial markets to the Treasury's Autumn Statement on Thursday 17 November, rates could even shift upwards again.
Variable-rate mortgages are already on the way up thanks to the recent hike to the Bank of England base rate.
What to do if you need a new mortgage deal
Those wondering what to do with their mortgage should see our latest mortgage analysis, which covers points such as:
- What's happening with fixed-rate mortgages
- What's happening with variable-rate mortgages
- My mortgage deal is ending soon. Should I lock in a new deal now or wait to see if rates fall?
- Am I better off getting a new deal with my existing lender or switching lenders entirely?
- Mortgage switch help – what you need to do