Competition driving fixed rates down

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The average interest rate in the two-year fixed rate mortgage mortgage is at its lowest since the Bank of England base rate dropped to 0.5% in March 2009, according to analysis from moneysupermarket.com.

Fixed rate mortgages have steadily fallen over the last couple of years, with the rate on the average two-year product now 4.25%, compared with an average of 5.59% in spring 2009.

Three-year fixed rates are at their lowest since December 2010 while five-year products are at their lowest rate since January 2011 at 4.80% and 5.27% respectively.

The average two-year tracker rate is 3.58% – its lowest level since January 2011.

Moneysupermarket.com says the base rate would have have to rise by 0.60 percentage points over the next two years for the tracker to equal to average two-year fixed rate.

The rates on three-year trackers have also edged downwards, with the average now 4.05% – its lowest level since February 2011.

Clare Francis, mortgage spokesperson at moneysupermarket.com said: “It’s great to see fixed rate mortgage rates coming down and we are now seeing average rates falling to their lowest levels in several years. Many borrowers are worried that high inflation will result in base rate rising in the not too distant future and for these people it’s obviously great news that they can protect themselves from this eventuality by locking into a fixed rate at a lower level than they’d have been able to do a few months ago.

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