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Two-year fixed rates fall beneath five per cent – L&C Mortgages

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  • 05/12/2022
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Two-year fixed rates fall beneath five per cent – L&C Mortgages
Two-year fixed rates have started to drop back beneath five per cent as “lenders compete harder and pass through the benefits of easing funding conditions”.

According to L&C Mortgages, the decrease was also due to a fall in swap rates.

The broker firm said Coventry Building Society and Principality Building Society had both recently brought out deals at beneath the five per cent mark.

Principality Building Society offers a two-year fixed rate deal at 65 per cent loan to value (LTV) at 4.65 per cent. It comes with a £895 fee and minimum loan of £140,000.

Coventry Building Society has brought out a two-year fixed rate at 65 per cent LTV at 4.85 per cent. It is subject to a £999 fee.

The broker noted that five-year fixed rates generally were lower than their shorter term equivalents, which is partially due to swap rates.

Principality Building Society is offering a five-year fix at 4.60 per cent at 65 per cent LTV and is subject to a £1,395 fee.

Coventry Building Society’s is a five-year fixed rate at 65 per cent LTV at 4.69 per cent with a £999 fee.

 

SVRs climb and trackers grow in popularity

L&C Mortgages said that the increase in the base rate, which now stands at three per cent, continued to feed into lender standard variable rates (SVR).

The broker pointed to Virgin Money, which increased its SVR from 6.49 per cent to 7.24 per cent.

It explained that a borrower with a £150,000 25-year mortgage at 7.24 per cent would pay £1,083.24 per month.

L&C Mortgages said that those who “prefer to play a waiting game” to see if fixed rates keep on falling can do better than sitting on an SVR.

The firm pointed to base rate trackers which have had a bigger uptake of late, as even though rates can still climb higher the “lower initial rates on offer still look like attractive”.

The broker added: “Some tracker deals also have the benefit of no early repayment charges (ERC) at any time, which gives additional reassurance that they can switch to a fixed rate at a later date if they feel that’s a better option.”

It pointed to Barclays’ two-year tracker, which is 0.4 per cent above the base rate, leading to a rate of 3.4 per cent. and has no ERC.

David Hollingworth, associate director for communications at L&C Mortgages, said: “The rollercoaster ride for borrowers continues with potential for confusion as fixed rates come back down despite the prospect of a further increase in base rate as early as next week.

“The reductions in fixed rates offers those whose natural inclination is to put security into their mortgage payment the chance to do so at a more appealing rate and that shouldn’t stop them being able to review again if rates come down further.”

He said that “taking some action is likely to be more cost effective than drifting onto SVR”, which he said were around 6.5 per cent and some were as high as seven per cent.

“Taking advice will not only help you understand the options available but also help you keep abreast of any further shift in rates.”

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