Average five-year fixed-rate mortgages in the UK slipped over the past year, from 5.59 percent to 4.86 percent, triggering a decline in interest from many homeowners as mortgage lenders aim to increase their standard variable rates (SVR) beginning 1 May 2012.
“Average rates for five year fixed rate deals have been falling steadily for the past couple of years,” said Louise Holmes, a spokesperson from Moneyfacts.co.uk.
“Fixed rate mortgages offer the reassurance of a set monthly payment and can be beneficial when planning financial budgets, as the repayment amount remains the same over the duration of the term.”
She noted that the cost of “funding through the swap rate market has also decreased dramatically, causing a knock-on effect of lenders offering low rates on long-term mortgages.”
Meanwhile, Mark Harris, Chief Executive of mortgage broker SPF Private Clients, said that for those need the assurance of a fixed rate, a five-year deal will be the best. With interest rates unlikely to increase over the next two years, there is not much value in choosing for a two-year fixed rate loans. A five-year fix loans will give borrowers a security with rates significantly lower compared to a year ago.
However, Harris warned that this low rate would not last forever.
“While five-year Swap rates have fallen considerably over the past year, they have started to creep up since Easter. So while lenders have reduced their five-year fixes since last year, this situation is unlikely to last, particularly as they are increasingly using mortgage rates as a way to maintain service levels,” he noted.
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