Homes and Property

Cheap home loans for grown-ups

By David Spittles
The lowest-ever five-year, fixed-rate mortgage deals have been launched, giving homebuyers a compelling reason to peg their borrowing costs until 2017.

HSBC and Santander are offering 2.99 per cent, lower than most two-year fixed rates on the market, as well as being lower than many lenders’ standard variable rates.

The rate cuts follow the Treasury’s “funding for lending” scheme which lets banks make more cash available to small businesses and households.

Previously the best five-year fix was Clydesdale’s 3.79 per cent. Other lenders are expected to trim their deals but experts believe the new record low is unlikely to be beaten.

“The euro crisis could easily result in money markets freezing again. For those keen to sign up for a fixed rate, any opportunities should be grabbed,” says Ray Boulger of broker John Charcol.

Most borrowers currently paying a standard variable rate are guaranteed to save money by switching to the new deal, plus they can guard against future base rate increases. However, borrowers need to have a deposit or equity of at least 40 per cent to qualify for the deals. This rules out most first-time buyers. There is also an upfront booking fee of £1,499, which can be added to the mortgage.

Santander has also unveiled other fixed rate deals, including a three-year fixed rate at 2.99 per cent for borrowers who do not want to commit beyond the medium term. Royal Bank of Scotland offers a five-year fix rate of 4.79 per cent to first-time buyers with a 10 per cent deposit.

NatWest has also launched a 2.95 per cent five-year fix. This comes with a much higher arrangement fee of £2,495, but remortgages qualify for a free valuations and free legal fees, which minimises costs for borrowers switching from another lender.

These headline-grabbing rates are only available for loans up to 60 per cent of the property’s value. The fixed rates for higher loan values are at least one per cent higher. Nationwide building society offers a five-year fix at 3.29 per cent on loans up to 70 per cent of value.



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