Fixed Mortgage Rates Fall To Their Lowest In Years

Date Published 22 June 2013

The cost of five-year fixed mortgages is below an average 4% for the first time in years.

According to the Mortgage Advice Bureau, the average five-year fixed rate last month was 3.96% – 0.9% lower than this time last year.

The difference adds up to a fixed term saving of over £4,700 for any borrower who took out the average five-year fixed mortgage in May compared with May 2012 – and a saving of over £13,000 compared with June 2007.

Average two- and three-year rates also hit record lows in May 2013 at 3.82% and 4.13% respectively.

The percentage of home buyers choosing fixed rates has jumped from 76% to 92% in the last 12 months, says MAB.

Using data from more than 500 brokers and 800 estate agents, MAB says there is a similar change in remortgage applications: 89% were for fixed deals in May 2013 compared with 72% in May 2012.

MAB also reports a 43% increase in mortgage applications for house purchase during May and a 20% rise in remortgage applications.

Over two thousand more products were available in total compared with May 2012 – 9,658 against 7,553.

Brian Murphy, head of lending at MAB, said: `As recently as two years ago the idea that five-year fixed rates would average less than 4% was absurd. Now we’re looking at a situation where five-year rates have fallen every month this year and product numbers keep on climbing as lenders compete for business.

`Low rates are a real pick-me-up in the face of rising housing prices, with some lenders also willing to pay the Stamp Duty for first-time buyers. Applications are consistently growing each month and concessions like this are a welcome tonic as the market continues its modest recovery.

`Current activity is especially strong in the new-build sector where Help to Buy is providing an answer for many buyers with limited deposits. Competition is set to get more intense over the summer as more lenders spot the potential for growth in the market for new-build properties.`