According to Moneyfacts, the financial information provider, interest rates for new mortgage deals have fallen to their lowest level for 23 years.
Moneyfacts said that as it became apparent the Bank of England are likely to delay before they raise interest rates banks were finding it cheaper to raise funds and could therefore offer mortgage deals with lower interest rates to their customers.
Michelle Slade of Moneyfacts said, “Earlier this year the market expected a rise in bank base rate, that saw mortgage rates start to rise,” she went on to say “An imminent rise in bank base rate now appears unlikely, and the cost of funding on the swap rate market has reduced.”
“Lenders appear to be applying cuts equally across all loan-to-value (LTV) tiers, which is good news for first-time buyers, as previously cuts were only being applied to the lower LTV bands,” she added.
The ‘swap rate’ determines the rate at which the banks can borrow money from the financial markets, which in turn they lend on to customers in the form of mortgages.
The ‘swaps’ market provides an indication of where interest rates are heading.
Until recently the market believed that an interest rate rise in late summer or early autumn was likely but following gloomy economic data combined with the voting patterns of the Monetary Policy Committee (MPC) the market now thinks and interest rate rise may be delayed until next year.
The view that any interest rate rise will be delayed is behind the drop in interest rate for new mortgage deals.
According to Moneyfacts the average two year fixed rate mortgage has an interest rate of 4.32%, three year deals have an average interest rate of 4.92% and if you wish to fix for a longer five year period the average deal has an interest rate of 5.29%.