The 1.99% home loan: Fixed mortgages reach record average low as house prices continue to fall

Published 06th Oct 2011

Fixed two-year mortgage deals have reached a record low of 3.82 per cent on average, it was revealed today.

Leeds Building Society today launched its lowest ever two-year fixed-rate mortgage with a rate of 1.99 per cent.

This brings the average two-year fixed rate to 3.82 per cent, down from 4.01 per cent in August.

The new low loan prices came as a second successive month of average house price falls was reported by Halifax.

Last month's decline of 0.5 per cent followed a fall of 1.1 per cent in August, although Halifax said average prices in the quarter to September were still 0.1 per cent higher than the previous three months - the first such rise since early 2010.

Halifax housing economist Martin Ellis said September's drop continued the mixed monthly picture so far this year with four rises, four falls and one month of no change in prices.

He added: 'This mixed pattern is consistent with a market where prices are lacking genuine direction.'

The average UK house price in September was one per cent lower than in December 2010 on a seasonally adjusted basis, at £161,132.

Mr Ellis said the financial uncertainty was likely to be constraining demand but added that low interest rates and a rise in employment over the past year have been supporting the market.

'We expect little change over the remainder of this year,' he added.

Typical mortgage payments for a new borrower have fallen from a peak of 48 per cent of average disposable earnings in mid 2007 to 26 per cent in the most recent quarter.

This is well below the average of 37 per cent over the past 25 years and the lowest since 1997, the lender added.

For mortgages, comparison website MoneySupermarket, whose records began in 2007, urged borrowers to consider all the fees and charges in order to snap up the best deal.

MoneySupermarket found that fixed-rate mortgage fees have generally risen by 6.4 per cent since June, making it harder for borrowers to compare the true costs.

It said a product with a slightly higher rate but lower set-up costs may work out cheaper, depending on how much you need to borrow.

Figures released last week showed that the number of mortgage approvals for house purchases climbed to a 20-month high in August, as borrowers took advantage of the raft of rate cuts.

Mortgage approvals for house purchases increased nearly six per cent to 52,410 last month, the Bank of England said, while remortgages surged nearly 10 per cent to 34,688.

A number of lenders - such as Nationwide and the Post Office - have slashed rates on a range of fixed-rate mortgages as the Bank of England holds its base rate at an historic low of 0.5 per cent.

Source: ' ThisIsMoney '

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