Record low interest rates have already been seen in two and five year fixed rate mortgage plans, but recent figures show that it is four year fixed rate plans that have seen the starkest drop ñ with Chelsea Building Societyís (CBS) latest offering coming with a rate of just 1.84%.
CBSí record low four year plan comes with a fee of £1,675 and will require a 40% deposit to be paid. Yorkshire Building Society offers an alternative plan with a slightly higher interest rate (1.89%) but with a lower fee of £975.
For those looking to pay a smaller deposit, CBS also have the lowest rate available for a four year plan with a 25% deposit at 2.24%., with YBSí equivalent rate just slightly higher at 2.29%.
Chelsea Building Society also currently offer the cheapest five year plan available, with a rate of 2.14%, 0.64% lower than last yearís cheapest offering and less than half of the equivalent figure for 2010.
The lowest deposit payable is 10%, and again CBS offer the lowest rates here, at 3.49%, with a £1,675.
This news follows swiftly on from the recently reported cheapest two year fix available from YBS with a rate of 1.07%, with experts predicting a drop to below 1% any time soon.
So why are we seeing such a consistent and dramatic drop in rates for fixed term mortgages?
There are a variety of factors at play here, starting with a low Bank of England interest rate, which currently stands at 0.5%, with a hike up to 0.75% not expected until May 2016, a full three months later than initially planned.
Also the ever increasing number of products on the market boosts competition and naturally leads to competitive prices. To put this in perspective ñ there are now more than twice the number of two and five year fixed rate mortgages available than there were five years ago. These figures have been rising steadily and look to continue doing so.
This, coupled with ever decreasing costs of wholesale funding, has forced UK mortgage rates in general down at a time when they were expected to rise sooner than ever.
The anxiety over potential rate rises on the horizon however is still very much present, and so more and more people are opting for fixed rate deals while rates stay low in an effort to ensure that they can take advantage of these rates for as long as possible. The resultant completion between lenders has led to a game of one-upmanship that the consumer can most certainly enjoy the results of.
The particularly steep drop in rates for four year fixed rate plans comes as something of a surprise, given the previously general trend towards pushing two and five year fixes, leaving the middle ground a little overlooked.
This all looks set to change though thanks to Chelsea Building Societyís latest product. Customers looking for the lowest rates will still opt for two year plans, but those looking for absolute security more often than not tend to go for five year fixes. But now, with four year fixed rates dropping below 2%, for a slightly shorter period of time ñ it looks like a perfect middle ground has emerged.
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