Competition sees cost of fixed-rate deals fall

The average cost of a two-year fixed-rate loan now stands at 4.63 per cent, the lowest level since April last year and down from a recent high of 5.21 per cent, according to financial information group Moneyfacts.co.uk.

The reduction would save someone with a typical 150,000 mortgage around 50 a month.

There have also been falls in the cost of three and five-year deals, with these falling to 5.34 per cent and 5.85 per cent respectively, from highs of 5.61 per cent and 6.24 per cent.

The reductions have prompted commentators to say now may be a good time for people on their lender's standard variable rate to consider remortgaging to a fixed-rate deal. Choice is also continuing to increase, with the number of different mortgages available reaching 2,076, the highest level since December 2008 and 72 per cent above the record low reached in April last year.

A significant proportion of the new mortgages are also for people with smaller deposits.

There are now 19 different deals available for people with only 5 per cent to put down, while the number of 90 per cent loan-to-value mortgages has risen by 107 per cent during the same period.

Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "Lenders have slowly become acclimatised to a new-look mortgage market and continue to take more steps to improve the competitiveness of deals.

"Lenders are becoming more active in the mortgage market, which is welcome news for borrowers as increased competition is one of the overriding factors in driving rates downwards."

But she added that despite this, people still typically needed at least a 25 per cent deposit to qualify for the most competitive deals, while overall lending was still well below normal levels.

Hannah-Mercedes Skenfield, mortgages channel manager at moneysupermarket.com, said: "It's promising that fixed-rate mortgage rates are moving in the right direction.

"With inflation rising, the potential for the Bank of England to increase base rate in the near future increases, so borrowers who are looking to fix their mortgage repayment should consider whether now is the perfect time to switch."