The cheapest long-term home loans ever are now being offered to borrowers in the UK. This is since the RBS group, Santander, HSBC and Nationwide have slashed their mortgage rates to under 3 percent for new fixed rate mortgages over four and five year periods. This has happened because of the Bank of England’s Funding for Lending scheme which has made cheaper funds available to the lenders.
The people who will benefit most from these new deals are those who are currently paying a high interest rate but who have a lot of equity in their property. The new deals are mostly only available to those with at least 40 percent deposit. So if you bought your home a few years ago the chances are that you will have plenty of equity to fund the deposit.
Those borrowers who are on a cheap lifetime tracker deal are not likely to be tempted by these new offers. The same can be said for those that are on the old standard variable rate of C&G, Nationwide and LTSB. These are capped at 2 percent above base rate for the whole term of the mortgage. About 70 percent of mortgages are on a variable rate which varies between 2.5 to 6.14 percent.
Many people will find these new rates an attractive proposition but if someone is on a fixed rate deal that was originally for five years or less, then it will not be worth them paying the early repayment charge to get on one of the new deals. Even if you are in the last year of a fixed rate deal, the ERC can still be anything between 2 and 5 percent so you are better off to stay where you are.