The average rate of interest on a two year fixed rate mortgage has fallen to its lowest level in seven years, according to market data. Reports have shown that the average rate of interest charged on a two year fixed rate mortgage has now fallen to just 4.52 percent, which is the lowest it has been since September of 2003 when it fell to just 4.51 percent.

With lenders trying to get consumers off variable rate mortgage deals many have been dropping their fixed rate mortgages since 2009, and this has seen the average rate on these fixed mortgages continue to fall steadily. Officials said that many consumers are on standard variable rate mortgages at record low levels, and lenders want to try and get them onto fixed rate deals by dropping the rates to make the deals seem more tempting.

Industry experts have said that homeowners are now increasingly staying on standard variable rate mortgages with low rates of interest rather than switching to higher rate fixed rate deals, and this is something that lenders are determined to address. The urgency for lenders has been further increased by the fact that the base rate has now been at a record low of just 0.5 percent for well over a year now.

One finance expert said: “Many borrowers are opting to remain on record low SVRs and overpaying their mortgage rather than secure a new deal at a higher rate. Lenders are trying to incentivise borrowers onto new fixed rate deals by making significant cuts to rates. A fifth of lenders have moved to increase their SVR since bank rate was kept on hold after finding their previous level unsustainable. Competition for a limited amount of mortgage business continues to increase amongst lenders, who are once again actively competing to be top of best buy tables. Previously, only deals for borrowers with large deposits were seeing cuts, but as the market improves borrowers with smaller deposits are being offered more competitive deals. The platform has been set for the mortgage market to return to some sort of normality, while still applying the lessons learnt over the last few years.”

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