You can still fix for under 5% – but it will cost you

  • Number of fixed-rate deals under 5% falling dramatically
  • Average application fee is £2,062

Homeowners looking to fix their mortgage rates are facing an ever dwindling choice of competitive deals, according to new analysis by*. The independent financial comparison website has revealed that the "5% club" of fixed rate products with an initial rate payable of under 5% still exists but it is pretty exclusive and average fees are £2,062.

Its analysis shows that in July 2006 homeowners could choose from as many as 112 fixed rate deals with an initial rate under 5%.

However, since the Bank of England began raising interest rates in August ’06 the number of attractive fixed rate deals has diminished at a rate of around nine products per month – and now it’s a mere 29 products available from just 14 lenders.

And as homeowners await further rate rises this month, warns that fixing to such attractive rates doesn’t come cheap either – the average application fee on 5% club deals is a staggering £2,062.

Sean Gardner, Chief Executive of, said: "Fixing your mortgage rate at under five per cent was a real possibility in the summer of last year. If you did your research you’ll have found four and even five-year fixed rates under the magic five per cent mark.

"However as rate rises continue lenders have had to react by offering less attractive deals, particularly on fixed-rate mortgages. There are still some good products out there but none of the five per cent club will tie you in for longer than two years and with such hefty application fees you may be better seeking out a slightly higher rate."

Recent results from’s Switching Index** show that some 1.84 million people switched their mortgage in the past six months – down some 5,700 on last quarter as Bank of England interest rate rises hit home. Its research has also revealed that more than 460,000 applicants have been turned down by mortgage firms over the same period***.

A fourth Bank of England base rate rise since August 2006 would this month take the base rate from 4.5 per cent to 5.5 per cent, adding around £711 to the annual cost of an average £100,000 variable rate mortgage (repayment basis).

Sean Gardner added: "With around 77,000 mortgage applications being rejected every month the mortgage market is clearly becoming a bit of a minefield. Nobody knows when rates are going to stop rising and without that clarity the cheaper deals are slowly disappearing.

"Anyone wanting to climb the property ladder needs to take advice and research the market before making an application – don’t be fooled by a low headline rate as fees and tie-ins can play a big part in the overall decision."

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* Analysis of the Defaqto Aequos Database between 13.07.06 and 30.04.07
** YouGov interviewed 2,374 GB adults (18+) between 2nd – 4th April 2007
*** YouGov interviewed 2,291 GB adults online between March 21st and 23rd 2007

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