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First time buyers could cash in as mortgage rates continue to fall

As retailers turn to mid-season sales, lenders are also pushing to hit year-end targets and attract new customers. So if you're a first time buyer you could get a really good deal now on a mortgage.

November 6, 2019

2 minute read

First time buyers could cash in as mortgage rates continue to fall

First-time buyers are benefitting from the increased competition among banks, which has caused average mortgage rates to fall by a tenth in the last year.

The Telegraph reported this week that mortgage companies were struggling to meet their yearly lending targets because of the property market slowdown and had cut rates in an attempt to drum up new business.

Buyers with small deposits have been one of the primary beneficiaries of the lower rates.

Mortgage rates for people with a 5% deposit are now as low as 2.59%, a deal which is offered by the Newcastle Building Society, subject to £763 in fees.

A fee-free loan is available at HSBC with a rate of 2.69%. Both deals are fixed for two years.

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5 year fixed mortgage rates fall

Despite the Bank of England increasing interest rates twice in the past 18 months, mortgage rates for first-time buyers have been getting cheaper.

Mortgage borrowers concerned about the current economic uncertainty and wanting to fix their mortgage into a long-term deal will be pleased to see that five year mortgage rates have seen a sharp drop in the last 12 months.

The latest research from Moneyfacts shows that the average five year fixed mortgage rate has fallen by 0.19% in the past 12 months, while the average two year mortgage rate has decreased by just 0.08%. This has narrowed the gap between the average rate being offered on a five year and two year fixed rate mortgage and means that those wanting to lock their mortgage into a five-year term will be able to benefit from highly competitive rates currently available.

The Telegraph reported that lenders get to this time of the year and have to push to hit end-of-year lending targets. Hence low rates to boost activity in the first-time buyer market.

UK Finance, the banking industry trade body, said that there were 35,010 new first-time buyer mortgages completed in August 2019, 0.7pc higher than the previous year.

In the same time period, the number of home mover, remortgage and buy-to-let completions all declined.

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Angela Kerr Director, Editor

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