This week Moneyfacts released research revealing the best five year fixed rates are fast disappearing from the mortgage market. This information is unexpected when considering general industry predictions that people still have some time to deliberate over their remortgaging options before the base rate rise next year.
The revelations revealed that in May Brits with a 40% deposit managed to snap up one of the best historical five year fixed rates ever released at the stonking rate of 1.99%. However, since then the best five year fixed rate available today have has crept up to 2.29%.
Rate cuts to secure borrowers…
The mortgage market has been characterised over the past few months by lenders continually cutting rates in an attempt to secure borrowers. This meant the traditionally stagnant months of July and August were uncharacteristically an opportune time to save a pretty penny if you had a smaller deposit and wanted to invest.
Charlotte Nelson, the Moneyfacts researcher, blamed the extraction of these best five year fixed rate high street deals on the widespread news stories surrounding expectations of interest rate rises. Islay Robinson, CEO of Enness Private Clients, supports this premise saying “As a general rule when speculation about rates becomes more newsworthy, the banks tend to take a step back and begin to shy. These may be early indicators that the end of the lowest rates may be drawing nearer, but that’s not to say there isn’t enough time to secure a competitive rate”.
There is much speculation as to whether this is the trend of rate cutting fully waning or whether these high street banks intend to release more record breaking five year fixed rates in the New Year as part of a last push to reach their targets before the base rate is solidly on an upward trajectory.
How does this affect the best fixed rates?
The best five year fixed rates are not only becoming more expensive as a direct response to the rate rise but also indirectly due to a notable increase in wholesale costs. This is the price at which lenders borrow money ‘wholesale’ to then lend out to borrowers, as these have started to increase lenders have little option but to raise their rates in response.
Although you may have missed the bus on these historic five year fixed rates in particular, do not fear, they only represent a very slim section of the mortgage market. Especially when you consider rates at a million pounds plus (which comprises of most of our clients) can be negotiable with the right lender.
Although these rates are important as they demonstrate the fact low rates don’t stay around forever, it’s also important to remember most million pound plus rates are dependent upon your wider financial picture, particularly if you are using a private bank. Rates are still much lower compared to those of a few years ago; making now a perfect time to re-consider your options before they edge up further.