A good time to fix?

May was the cheapest month for fixed rate mortgages in the UK since the onset of the financial crisis according to the latest National Mortgage Index from the Mortgage Advice Bureau.

At 3.96% the average five year fixed rate for the month dropped below 4% for the first time since MAB’s records began in June 2007 and was 0.9% better than the same time last year.

The difference adds up to a fixed term saving of over £4,700 for any borrower who took out the average five year fixed mortgage in May compared with May 2012, and a saving of over £13,000 compared with June 2007.

Average two and three year rates also hit record lows in May 2013 at 3.82% and 4.13% respectively and the percentage of home buyers choosing fixed rates has jumped from 76% to 92% in the last 12 months. 

Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows a similar change in remortgage applications: 89% were for fixed deals in May 2013 compared with 72% in May 2012.

Home buyers have driven the surge of activity in recent months with purchase applications during May 2013 up by 43% year on year, compared with a 20% increase in remortgage applications.

The firm also says that competition from lenders has had a positive impact on rates across the loan to value (LTV) range over the last year. The average purchase LTV of 71.4% in May 2013 was 3% higher than the same time in 2012.

As a result, although deposit requirements grew month on month from April, the typical homebuyer saved over £1,300 on their deposit in May 2013 compared with May 2012.

Purchase prices have increased in that time, reflecting the 2.6% annual growth to April 2013 in the latest House Price Index from the Office for National Statistics. MAB’s figures show the typical home buyer therefore applied to borrow £6,600 more for their mortgage in May 2013 than the same time last year.

Consumers benefitted from a 6% leap in the number of mortgage products offered during May whether or not they chose to use brokers or go direct to lenders.

Mortgage rates have only one way to go and that’s up! So, for those of you who would like to know exactly what your mortgage repayments are going to be for the foreseeable future, then now might be a good time to fix.