Take Advantage of the Cheaper Mortgage Deals
There has never been a better time to start shopping around for the most affordable mortgage deal with the new lower interest rates announced by the Bank of England.
These rates are the lowest they have been in over 300 years and no one can predict when they will start to rise again. Maybe they will be low for a while depending on how fast the economy rebounds from the recession that is affecting the whole world.
The Royal Bank of Scotland recently announced the return of the bargain two-year fixed rate mortgage at 3.49%. With the rates being so low now is the time to lock in your mortgage and have lower payments each month. By locking in now, you are assured of keeping this low interest rate for the next two years. RBS/NatWest followed suit by reducing their interest rates on mortgage to 3.49% for borrowers that can make a 25% down payment and the fee of £799.
Other lenders who have cut their mortgage interest rates to this low rate include Nationwide, Alliance and Leicester and Abbey. However, the best mortgage deals are for those who have the money available to make the required 25% deposit. The recent cuts in the interest rate has become common now with almost all lenders offering fixed rate mortgages at interest rates that are less than 5%. Some lenders though have restricted these best deals to customers who are able to make a much larger deposit – often as much as 40% of the purchase price of the home.
The reduction in fixed rate two-year mortgage deals is great news, but the rates are still higher than those being paid by those with base rate tracking mortgage agreements. According to a recent survey conducted by the Council of Mortgage lenders more than half of the homeowners surveyed are pleased with the lower interest rates and would opt for fixed rate mortgages because they know exactly how much they will pay each month.
One of the questions those looking for a new mortgage or those looking to switch their mortgage to take advantage of these great deals is “Which lender has the best deal?” If you do a comparison check online you will find that Natwest/Royal Bank of Scotland has the best deal for consumers with a fixed rate on a two year mortgage of 3.49%. In order to be eligible for this rate, you must be able to make a deposit of 25% of the purchase price and pay the £799 fee. The previous interest rate charged by this lender was 4.14% and a £999 fee. If you can only come up with a deposit of 15% you can still get a good deal because the lender offers mortgages at 5.49% to these borrowers and the fee remains at £799.
Abbey customers will receive a two-year fixed deal with 4.39% for customers who can make a 25% down payment and the fee for mortgage loans up to £200,000 is 549. At Alliance and Leicester, the fixed rate is 4.69%. Customers of Nationwide can enjoy fixed rate mortgages at lower interest rates for two, three and five year deals. A borrower making a 25% deposit on a mortgage can receive an interest rate of 4.88% on a three-year mortgage. This means a cut of one full percent.
Even though the Bank of England has cut its rate to 1.5%, lenders say that this does not have any affect on the interest rates they offer to customers. They are however, reflecting the fact that the money markets have fallen about 2% below the fixed rates.
Lenders are scrambling to shore up their finances and at the same time they are under pressure to approve mortgages for those with the ability to repay. When lenders refuse to approve mortgages, this results in the decrease of house prices, which is what has happened in the market. If you are holding out for even better deals on mortgages and interest rates, you may have to wait for quite some time.
[Figures correct as of Feb 1st 2009]
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