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Two year fixed rates now below 7%

The average two year fixed rate is now below 7 per cent after a number of lenders including Halifax and Nationwide Building Society have cut rates.

Abbey, Cheltenham & Gloucester and Woolwich have also reduced the price of their fixed rates as a result of swaps falling.

Moneyfacts.co.uk analyst Michelle Slade says just ten days ago the average two year fixed rate peaked at a rate of 7.08 per cent, its highest in over a decade.

“As swap rates increased lenders were quick to pass on their increased borrowing costs to customers. However, as swap rates have declined these same lenders have not been in quite the same hurry to bring their rates back down.

Slade says until recently Moneyfacts best buys have been dominated by rates over 6 per cent.

“Some lenders have now started offering deals with rates just below this level, so it’s worth shopping around. The number of product on offer has also started to slowly creep back up as lenders that previously cut their product ranges right back start to extend them again. At the end of June there were just 3,403 products on offer; today that has increased to 3,887.

But Slade warns that it is too early to say that the market has finally turned the corner.

“We need to see a more prolonged period of rate reduction, something which is starting to look unlikely. Although the average two-year swap rate is well below its peak of 6.52 per cent in mid June, in the last few days swap rates have started to edge up again. If this continues we could see lenders once again passing the increased cost back onto consumers.”

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