An astounding new report on the impact of low-mortgage rates has been revealed, just a week before the country heads to the ballot box.
According to new findings, homeowners can potentially save in excess of £12,000 more than five years ago, by remortgaging onto one of the many competitive deals in todays market
Tumbling mortgage rates have led borrowers to be able to secure a saving of £12,434,40 on a fixed-rate, five-year deal compared to the same deal five years ago.[1] With the cost of living prominent in the election battle, these figures may sway many borrowers to vote Conservative.
Better off?
However, Rachel Springall of financial organisation Moneyfacts.co.uk, believes that borrowers’ gain has come at the cost of savers’ pain. Springall said that, ‘as the fifth year approaches since the last General Election, we have seen many changes to the economy, but consumers will be questioning whether they really are better off. While borrowers have seen positive changes, this has ultimately come at a cost to savers who lose out on decent returns.’[2]
Borrowers have been able to save more money due to mortgage rates reaching an all-time low. This can be attributed to the Bank of England keeping rates at just 0.5%. Additionally, more attractive Government initiatives can also be seen as a solid reason for the drop in mortgage costs.
One of the most prominent Government initiatives is the Help to Buy scheme, which has been invaluable allowing many first-time buyers to overcome the barrier of raising a deposit.
Lowest rates
As a result of increased mortgage activity, banks have produced their most competitive rates to try and reach their lending quotas. HSBC has recently introduced their lowest ever five-year fixed rate mortgage, at just 1.99%. However, restrictions are in place, with the rate only available to those with at least a 40% deposit. The rate also comes with a fee of £1,499.[3]
Jonathan Harris, of mortgage brokers Anderson Harris, acknowledges that, ‘the last five years have been particularly kind to borrowers with interest rates stuck at a record low of 0.5%.’ Furthermore, Harris said that, ‘those on base rate trackers or even a cheap standard variable rate have benefited, as have those taking out a cheap fixed rate deal.’[4]
Harris believes that, ‘the benefits of cheap interest rates and Government initiatives will be felt for a long time to come if borrowers opt for a medium-term fixed rate.’ With rates under 2% for a fixed term of five years, Harris stated that is, ‘astonishingly cheap for protection from interest rate rises for a reasonable period of time.’[5]
He went on to conclude that, ‘borrowers have never had it so good’ but warned that lenders face tighter affordability criteria with the introduction of the Mortgage Market Review.[6]
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