Best five-year fixed rate mortgage breaks through 3.5% barrier

The best five-year fixed rate mortgage has been slashed to below 3.5 per cent by Yorkshire Building Society – delivering further good news to borrowers hunting security.

Cheap money: The best five-year fixed rate is now 3.49%

The 3.49 per cent five-year fixed rate mortgage from YBS is on offer to borrowers with a 25 per cent deposit or equity and comes with a fee of £995.

Borrowers who would prefer not to pay for their new mortgage can secure a 3.69 per cent five-year fixed rate, which comes with a £95 fee but £250 cashback.

The cut marks the latest stage in a renewed battle for borrowers from lenders, with rates having fallen substantially in recent months. In March the best five-year fix on offer was from Nationwide at 4.39 per cent.

YBS has also cut the rate on its two-year fix mortgage to 2.59 per cent, or 2.79 per cent on the lower fee option.

The driving force behind the fall in fixed rates has been the horizon for interest rates rising from 0.5 per cent being pushed back substantially.

This has come as the recovery has struggled, eurozone debt crisis fears have hit and the Bank of England has signalled that it intends to keep rates lower for longer to protect the economy.

Interest rate futures have seen a big shift in recent months and now point to September or October 2012 for the first base rate rise. 

However, these market predictions are very volatile and just earlier this year they suggested a rate rise was imminent to counteract high inflation, driving up fixed rate mortgage costs.

Since then money market swap rates, which heavily influence fixed rate mortgage pricing, have fallen to 2.3 per cent on 21 July, having hit 3.2 per cent in February.

Thanks to this there are now a host of five-year fixes below 4 per cent, mainly for borrowers who can raise at least a 25 per cent deposit. 

It's cheap money and rates may not go lower

Fact

"At Heart Finance  we search the entire market in order to help you find the best deal you possibly can.

We are committed to offering our customers the highest possible 

standards of service

We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspects of our dealings with you

Only recommend a mortgage or financial services product that we consider suitable for you and that you can afford – Our lenders charge the lowest fees of all - and always the most suitable from the available options. "  

                                                      

This is Money's Simon Lambert says: This is a fantastic five-year fixed mortgage rate from YBS. Borrowing money for that period at 3.5 per cent is cheap and the 25 per cent deposit requirement and £995 fee are not overly onerous requirements.

Those looking for fixed rate security would do well to consider this. 

Borrowers may be tempted to sit on the fence and hope rates go lower still – they could do so, but the same approach left many disappointed that they didn’t seize the great fixed rates that were on offer last autumn. 

These swiftly vanished when the mood changed and remember that any signal from the BoE that it has had a change of heart and mortgage lenders will take advantage by raising fixed rates. Bymailonline)