Two-year fixed and two-year variable mortgage rates have fallen to new lows, driven in part by strong lender competition, new data reveals.
The latest data from Moneyfacts has tracked the rate of an average two-year fixed mortgage revealing a downward trajectory from 2.55% in July 2016 to 2.31% in January 2017 to 2.26% this month.
Two-year tracker rates have experienced a similar fall, dropping from 2.01% in July 2016 to 1.98% in January 2017 to 1.82% this month.
With the Bank of England hinting at a rise in base rate, along with rising inflation, Moneyfacts said that falling rates are the last thing many would have expected. However, it has been reported that the low rates could reflect the competitive lender marketplace and fears that Standard Variable Rate (SVR) borrowers will show no loyalty once rates rise.
Finance Expert for Moneyfacts, Charlotte Nelson said:
“While the average two-year fixed rate had stalled in recent months, it has fallen by 0.04% from June, so it appears that the trend of falling rates is now back on track. The fall in both the fixed and variable sector comes at an interesting time. Given mounting inflation and the Bank of England hinting at a base rate rise, falling rates are the last thing many would have expected.
“The base rate debate has dominated the headlines in the past few weeks, which has had a knock-on effect on the interest SWAP rate, causing the two-year SWAP rate to rise from 0.53% at the start of June to 0.68% in July.
“Recently, the savings market has also seen a boost. This, alongside the rising SWAP rates, has historically resulted in mortgage rates rising, but these influences are currently having little effect on mortgage rates, which are still on a downward trajectory.
“Lenders are perhaps starting to feel the pressure of an increased number of their customers sitting on their Standard Variable Rate, knowing that if the Bank of England decides to increase rates, a substantial chunk of their mortgage book could move to another provider almost overnight. This may be the catalyst that is keeping rates low, as providers aim to lock customers into a deal with them."
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11th July 2017