The Co-operative Bank increased competition in the longer-term mortgage market this week by launching a new five-year fixed deal for its current account holders.
The product is available at a rate of 3.39 per cent with a 25 per cent deposit and at 4.24 per cent for those who have a 15 per cent deposit.
The offer is open to new and existing customers and has an application fee of £999.
James Hillon, the bank’s head of mortgages, said: “At a time when living costs are rising, many homeowners are looking for the extra security offered by a fixed rate deal.”
Lenders have been slashing their rates as the Bank of England’s base rate remains at a historic 0.5 per cent low.
A spokeswoman for comparison website Moneyfacts said both deals are “very competitive”.
She said: “The Co-operative’s 3.39 per cent deal with a 75 per cent LTV (loan-to-value) and £999 fee sits alongside Yorkshire Building Society’s market-leading five-year deal, which also has a rate of 3.39 per cent and a fee of £995.
“Even in the overall five-year fixed rate market, this deal sits very high, with the top rate from Chelsea Building Society at 3.29 per cent.”
She said Leeds Building Society currently leads the five-year fixed 85 per cent% LTV market, with a 4.19 per cent deal.
“The Co-operative’s 4.24 per cent deal sits just behind the Leeds Building Society deal in the 85 per cent market, although features quite far down in the overall five-year fixed rate market,” she said.
Meanwhile, Housing Minister Grant Shapps has called on lenders to consider offering fixed mortgages of up to 30 years to encourage greater market stability.
Mr Shapps told a seminar in London that he wants to spark a national debate on longer-term fixed mortgages as a “normal and sensible choice”.
There are currently no mortgages with guaranteed lifelong interest rates and longer term deals often require hefty deposits.
Mr Shapps said: “In today’s uncertain world, people want to know where they stand.
“Yet when it comes to buying a home, there are no mortgages available for them where they can fix their payments for a long time – the longest fixed-rate mortgage for many is five years.
“Longer term mortgages – possibly as long as 30 years – could help families on tight budgets know exactly where they stand when they’re buying a home, by giving them greater certainty over how much they will be paying for their home in years to come.
“While they won’t be right for everyone, lenders should start to look at the case for 30-year mortgages and how we can move to a more stable housing market where first-time buyers can get their first foothold on the property ladder.”