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‘Desperate lenders’ keeping mortgage interest rates low

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  • 02/11/2018
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‘Desperate lenders’ keeping mortgage interest rates low
Two-year fixed mortgage rates stood at 2.5% over the last month, following the Bank of England’s decision to hold rates after the hike in August.

 

Two-year mortgage rates have only slightly climbed compared to October 2017, according to the latest figures released by Moneyfacts.

Rates have increased by up to 0.2% in the last 12 months, up from 2.33% in the same period last year.

However, the report found that the average two-year mortgage rates have been flat in the last five business days.

Yesterday the Bank of England has maintained the base rate at 0.75% for the third month in a row, after raising the base rate in August.

Dominik Lipnicki, director of Your Mortgage Decisions, said it was not surprising that the two-year fixed mortgage rates have remained unchanged.

He added: “Lenders are desperate for business and they have to meet their lending targets. They want to encourage their clients to get cheap deals because it is more likely that clients decide to renew them.”

 

Loss-leading products

Ray Boulger, senior technical manager at John Charcol, said it was more important to understand what the market perception was, in terms of how far the interest rates can move over the next two or five years.

He added: “Yesterday the Bank of England kept the base rate unchanged at 0.75% and the next one could be up or down depending on Brexit negotiations.

“Brexit is not the major factor explaining why rates remained unchanged over the last month, but surely it is the reason why they have remained low over the last couple of years.”

Jonathan Clark, mortgage partner at Chadney Bulgin, said the pricing of two-year fixed rates appears to have less to do with Bank of England rates and more to do with a lender’s appetite to lend, possibly by attracting new customers with ‘loss-leading’ products.

He added: “Personally, I consider five-year fixed rates a better barometer of the mortgage market and these have only increased slightly over the last 12 months.”

 

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