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Two year-fixed rates drop below Bank of England base rate

Up to one in ten of the most competitive two-year fixed rate deals are now below the Bank of England base rate with the return of 4.99 per cent mortgage offers, says mform.co.uk.

The firm’s analysis shows that currently 24 out of the 200 best deals, ranked on true cost which includes all fees, are priced at 5.75 per cent or lower whilst 63 of the best deals are priced at 5.99 per cent or lower.

Yorkshire Building Society is offering a 4.99 per cent two-year deal – which includes a two per cent fee based on the sum borrowed – while others such as Nationwide and West Bromwich Building Society have cut fixed rates.

Marketing and business development director Francis Ghiloni says: “Cheaper fixed rates are on the way which will be a relief to many and particularly those whose current fixed deals are coming to an end.

“However lower headline rates do not necessarily mean lower costs for borrowers. Some of the low initial APRs are only made possible by high upfront fees. Borrowers need to focus on the true cost of their loan. Many lenders are now offering loans where the fees are based on the size of the advance. Borrowers need to be rate smart when comparing mortgages.”

Mform.co.uk uses the example of Cheltenham & Gloucester which offers a two year fixed rate at 5.29 per cent and another at 6.33 per cent.

It points out that when compared on true cost the 6.33 per cent deal is less expensive. Fees on it are only £99 for someone borrowing £150,000 while fees for the 5.29 per cent deal are £4,249 Monthly payments for the 5.29 per cent deal are £661.25 and £ 791.25 for the 6.33 per cent deal. But the true cost over two years is £18,689 for the 6.33 per cent deal and £20,119 for the 5.29 per cent offer.

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