There is very little difference between the long and short-term mortgage costs according. This is according to data release by the Bank of England. The analysis revels that long-term mortgages are being offered at the lowest interest rates since the financial crash in 2008.
Mortgage Costs are Changing
In April 2018, the average interest on a 10-year fixed mortgage with a loan to value (LTV) of 75% was 2.76%, which is a drop from 2.78% in the previous year. In contrast, the average interest rate on a two-year fixed rate deal was 1.72% with an LTV of 75%; this is an increase of 37 basis points from the record low rate of 1.35% in April 2017.
As a result, the gap between long and short-term mortgage costs has shrunk from 1.43% in April 2017 to just 1.04% today. According to the analysis of the Bank of England data by mortgage broker Private Finance, this is the lowest it has been since December 2008.
Significantly Low Rates
A decade ago, the average 10-year rate was 5.72%, whereas today’s average product rate is only 2.76%. This is still very close to the record low of 2.66% seen in December 2017 and January 2018. Furthermore, product availability has improved. Long-term mortgage deals like 10-year fixes were largely absent from the market between 2009 and 2014.
Borrowers Should Look at Long-Term Mortgage Costs
The UK mortgage market has generally favoured short-term fixed deals, yet longer-term options look more attractive. This is due to the anticipation of the Bank of England following through with incremental rises to the base rate. Being locked in for a decade gives borrowers to immunity from further rate rises that will affect their monthly repayments.
Previously, borrowers found long-term fixes less appealing because of a lack of flexibility, with the chance that rates may fall thus leaving people paying more than they would if they switched every two years. However, rates have little room to fall any lower than they already have therefore it may be time to reassess these concerns.
