Mortgage rates reach historic lows
Two and five-year fixed rate mortgages have fallen to their lowest level for 14 years, as the property market gradually starts to re-open.
New regulations came into force on Wednesday which allow homebuyers to view properties and move home, provided they can adhere to social distancing measures. The mortgage market is alo getting moving again, with borrowers benefitting from exceptionally low fixed mortgage rates.
The average two-year fixed rate mortgage currently stands at just 2.09%, according to research by financial website Moneyfacts.co.uk, whilst the average five-year fixed mortgage is at 2.35%. In March this year, the average two-year fixed mortgage rate stood at 2.43%, and the average five -year rate at 2.74%. Rates are currently at their lowest level since Moneyfacts’ electronic records began in July 2007.
The Bank of England’s Monetary Policy Committtee cut the base rate to a record low of 0.1% in March to help reduce pressure on the economy caused by the coronavirus pandemic. However, the cost of fixed rates is largely determined by ‘swap’ rates, which are the rates bank pay to borrow from each other. These have fallen sharply since the start of the year.
Number of mortgages ticks up
Although rock-bottom fixed rates are good news for homebuyers and those looking to remortgage, the number of mortgage products available has nearly halved, from 5,222 at the beginning of March to just 2,566 at the beginning of May. Several lenders, however, have now started to expand their mortgage ranges after temporarily withdrawing some of their products when the lockdown was introduced.
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David Hollingworth, spokesman for mortgage brokers London & Country mortgage brokers said: “Many lenders restricted the number of mortgages on offer so that they could cope with demand from borrowers requesting payment holidays. Physical valuations have also had to halt, with staff shortages and office closures adding to lenders’ pressures.
“However, recent days have seen lenders begin to reintroduce some of the deals they withdrew, including higher loan to value (LTV) mortgages for those with smaller deposits.”
A day after plans to re-start the housing market were unveiled, comparison site MoneySuperMarket.com reported an 18% increase in visitors searching for mortgages deals compared to the previous week. Those whose incomes have been affected by the pandemic should seek advice on the options available to them.
If you’ve been furloughed by your employer, this shouldn’t affect your ability to get a mortgage or remortgage, although lenders will only take into account the income that you have been furloughed on, which will be 80% of your earnings up to a maximum of £2,500 a month.
Emma Harvey, mortgage expert at MoneySuperMarket.com said: “Banks will always ask for the last three months of earnings, with some lenders offering more flexibility around exceptional circumstances than others. However, those people who are currently furloughed should not suffer any adverse credit or change in risk profile. Consumers just need to be honest about the situation and if in doubt talk to their lenders or broker for support.”