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Families could be as much as £1,700 better off over the next five years compared with a month ago as lenders fight for a share of the market. Interest rate cuts have led to a series of recordbreaking deals from banks and building societies and forecasters predict even cheaper offers to come.
Property experts say homeowners have never had it so good. Two-year fi xed rates are tipped to fall below one per cent and five per cent “within weeks”.
First Direct is already offering five-year rates at 2.28 per cent or 2.89 per cent for 10 years while HSBC is wooing borrowers who have a 40 per cent deposit with a two-year deal at 1.19 per cent.
Barclays and Norwich & Peterborough Building Society have also reduced the cost of their home loans. Mark Harris, chief executive of broker SPF Private Clients, said: “Lenders are keen to advance more money this year and they’re cutting their prices to entice borrowers.
With Barclays launching its lowest ever five-year fix at 2.29 per cent and Virgin Money launching a five-year deal pegged at 2.24 per cent, we edge ever closer to a subtwo per cent five-year fix.
“Even though it is coming, it will still be truly astonishing when it happens – an incredibly low rate for medium-term certainty.
“Banks will hope to make money by selling customers other products such as current accounts and credit cards.”
Aaron Strutt, of Trinity Financial, said: “For fixed rates to drop below one per cent would be extraordinary.”
Clive Moore, of investment firm IDAD, said: “A mortgage war is a sure sign of a significant upturn in the economy.
“Prices are at rock bottom and borrowers have never had it so good.”
Indications that the Bank of England will be keeping the base interest rate at its record low of 0.5 per cent is fuelling the fierce competition between lenders.
A month ago, borrowers could get a five-year deal from Skipton Building Society for 3.99 per cent with a £1,055 sign-up fee.
Now the cheapest rate is offered by Norwich & Peterborough, which charges 3.84 per cent with a fee of £1,285. Over the course of the loan, the borrower will repay £1,689 less.
The largest savings are for those with a 10 per cent deposit, according to brokers London & Country.
Longterm deals give homebuyers the peace of mind of knowing that they will be locked into affordable repayments even if interest rates should rise sharply.
Gary Festa, of wealth management group HFM Columbus, described the current flurry of price cutting as “good news all round”.
He said: “People are experiencing historically low interest rates, cheaper stamp duty bills and the first real rise in their incomes for a few years.
“Add in the fact that lenders are awash with money because they themselves can borrow cheaply and there’s a perfect storm situation here."