Long-term fixed-rate mortgages at all-time low | CPS Homes

Cost of long-term fixed-rate mortgages at an all-time low

Cost of long-term fixed-rate mortgages at an all-time lowSince the UK voted to leave the EU at the end of June, there has been some uncertainty about how the country leaving the European Union will affect the British housing market. Even prior to the referendum, there was a drop in house sales as people held off committing to the financial expenditure without knowing if they’d be getting a better or worse deal following the vote.

It now seems that following the vote, there has been a positive impact for property buyers, with the cost of five and ten-year fixed-rate mortgages falling.

Borrowing costs are being cut

The mortgage brokering company John Charcoal believe that a fall in gilt yields will reduce the cost for lenders of long-term funding, which in turn will lead to cheaper fixed-rate mortgages for buyers.

It seems that more lenders will join the likes of HSBC who recently released a five-year fixed-rate mortgage at 1.95%, with more lenders starting to offer mortgages under 2%. This means it may be worth waiting a little while before taking out a mortgage, as you may not be allowing yourself access to the best possible deal by agreeing to a mortgage too early.

Of course, this means that it’ll be easier for people looking to re-mortgage to take advantage of the cut in costs, as first-time buyers may not necessarily be able to wait for the perfect deal; that said, it’s likely that lenders will offer certain deals to first-time buyers.

These reduced costs are not necessarily due to the Brexit vote, but rather a continuation of trends that appeared prior to the referendum. In the run up to the vote, 5 and 10-year mortgages reached their lowest ever levels, with HSBC offering a 5-year fixed rate at 1.99% and Leeds Building Society offering a 10-year fixed rate at 2.89%.

On top of this, HSBC recently launched Britain’s first ever fixed rate mortgage below 1%. They currently offer a 2-year fixed rate mortgage at only 0.99%!

Why are mortgages getting cheaper?

The reason fixed-rate prices have dropped is that government bonds have seen a drop in yields, which is the interest rate that is paid to investors, so the City is searching for new cash havens. With gilt yields dropping to new lows in the hours preceding the Brexit vote, it’s clear to see why fixed-rate costs dropped even further.

However, it looks like this drop won’t affect short-term rates, if only because the rates for these mortgages are already close to zero, and the same is true of the Bank of England base rate.

These changes mean that buyers are more likely to see price competition in the coming weeks as lenders try and outdo each other to provide the best offer. However, while these savings are aimed at first-time buyers, there are those who believe that those in the re-mortgage market will see significantly better savings compared to first-time buyers.

If you’re looking to buy your dream property, we have hundreds of properties for sale in Cardiff! As one of the largest estate agents in Cardiff, we can also help if you're looking to sell your Cardiff flat or apartment. For more information, contact us, email: enquiries@cpshomes.co.uk, or pop into one of our branches in Cardiff Bay or Roath.

13 July 2016


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