Fixed Mortgage Rates Down to 2007 Levels
Rates for fixed mortgages are down to very similar levels to August 2007, and well down from their peak in July. However, associated costs, such as fees, and the amount of deposit required remain high. Also, a year ago the base rate was 5.75% as opposed to 5% now.
We’ve seen mortgage rates go up as a result of the credit crunch as banks tried to protect their own profits and get less risky customers. Bad news is much heard. Good news is not such an exciting currency.
However, research by price comparison website Moneyfacts reveals that mortgage rates are now almost back to the same levels as one year ago – just before the credit crunch took hold.
The average rate of a two-year fixed rate was 6.56% in August 2007, and it now stands at 6.59% - only very slightly higher. The average has also come down steeply from its peak in July of 7.08%.
The bad news that is still with us, however, is that the costs that go with mortgages are still higher than they were a year ago, and the best rates are only accessible by those who can afford large deposits. Lenders have reduced headline rates, but have maintained the higher fees that have been on the increase in the last 12 months.
Average arrangement fees for mortgages are now £964, where they were £803 this time last year. Deposits are much higher than a year ago, and now average 20%. There are only two 100% mortgage lenders now, compared with 33 a year ago.
Much has been made of the problems caused by the lack of mortgages on the market and the effect this is having, primarily keeping the market subdued. There are now 3,748 mortgage products available; a year ago there were 13,027.
Spokesman at Moneyfacts, Darren Cook, said: "The pricing is getting back to where we were a year ago, but the appetite for lending is diminished."
Banks may have put mortgage rates back down to levels of August 2007, but, as well as higher fees and higher deposits, they are making higher profits because the base rate – around which fixed mortgage lending rates are loosely base – is now 5%, whereas last August it was up at 5.75%.
