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The mortgage rate war has intensified following the launch of a new 1.05pc fixed-rate deal by Halifax.
The high street bank will offer borrowers this deal, the lowest fixed rate on the market, if they are willing to lock themselves in for two years.
The mortgage is available to customers who have at least a 40pc deposit and are borrowing between £250,000 and £1m. However, there is a hefty £1,499 fee for taking out the loan, meaning some borrowers may find it cheaper overall to take out a loan with a higher rate but no fee.
Mortgage companies have cut rates in recent weeks as they try and meet end-of-year lending targets.
Aaron Strutt of Trinity Financial, a mortgage broker, also pointed to Halifax’s 0.98pc two-year tracker as the cheapest variable deal in the market. This moves in line with the Bank of England Bank Rate, which is currently 0.75pc. This loan is subject to a £999 fee.
With rates still at historically low levels across the market, homeowners could save thousands of pounds by switching to a cheaper deal.
This guide tells you everything you need to know about fixed-rate mortgages and the best deals available. The tables throughout show the best fixed rates over two, three, five and 10 years and update automatically when new offers become available.
What affects mortgage rates?
The pricing of fixed mortgage rates depends on several factors, but mostly whether banks can get their hands on cheap money to lend out. They usually get it from savers or by borrowing from other banks on the money markets, buying money at a certain rate – the "swap rate" – for a certain period.
These swap rates react to expectations of future interest rates and inflation.
Action taken by the Bank of England can have an impact too. The bank has made it clear in the past that if runaway house prices are a risk and ultra-low mortgage rates are a cause, the latter will be policed away – possibly in the form of heaping new costs or capital requirements on the banks.
Lenders would be expected to pass on the increased costs in the form of higher rates.
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The difference between fixed and variable mortgage rates
If you take out a fixed-rate mortgage the interest rate you pay will be fixed for an initial period, regardless of rate changes made by the Bank of England or moves in the markets.
Fixed rates are typically for two, three, five and occasionally 10 years, with longer terms costing more.
Once the fixed period ends, borrowers are pushed onto the lender’s "standard variable rate", which can be much higher.
Variable mortgage rates can vary during the mortgage term, meaning borrowers will not have the security of knowing how much their repayments will be every month.
The cheapest fixed deals – for borrowers with big deposits
The three tables below show the best fixed rates at two, three, five and 10 years for a buyer with a large deposit or equity of at least 40pc. First-time buyers or those with very small deposits should scroll down further for the best buys relating to them.
It is well worth remembering that these continually up-to-date tables rank mortgages by rate and exclude other associated costs such as arrangement fees. High arrangement fees often accompany the lowest mortgage rates. Where this is the case, borrowers with smaller mortgages, or shorter mortgage terms, might end up better off by choosing a deal with a slightly higher rate and lower upfront fees.
For those who want the peace of mind of a fixed monthly cost, and for anyone who doesn’t want the risk of fluctuating interest rates, fixed-rate mortgages are appealing.
Best two-year fixes (40pc deposit)
Best three-year fixes (40pc deposit)
Best five-year fixes (40pc deposit)
The cheapest fixed deals – for first-time buyers or those with small deposits
As with the tables above, the best buys shown here make an assumption about how big a property buyer’s deposit is or how much equity an existing owner has in their home. The tables below assume a 10pc deposit or equity.
These borrowers, as above, should also be aware of the effect that upfront arrangement fees can have on the overall cost of their deal.
Best two-year fixes (10pc deposit)
Best three-year fixes (10pc deposit)
Best five-year fixes (10pc deposit)
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