Rates drop for FTBs since base rate hike: Moneyfacts

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Mortgages aimed at first-time buyers have seen their interest rates fall despite last year’s increase in the bank base rate, according to research from Moneyfacts.

The average rate on offer for a two-year fixed rate at 95 per cent LTV is currently 4.09 per cent the firm says.

This is down from 4.21 per cent in October and 4.24 per cent in July last year.

Rates have also fallen on five-year fixed rates available with a five per cent deposit.

The average rate is now 4.49 per cent, compared to 4.50 per cent in October and 4.55 per cent last July, the figures from Moneyfacts reveal.

Bank base rate was increased from its record low of 0.25 per cent to 0.5 per cent in November, the first rate rise in a decade.

Moneyfacts finance expert Charlotte Nelson says most would have expected rates on offer to first-time buyers to increase following the base rate change.

She adds: “Providers have started the new year with a bang, as they compete to be seen as the go-to lender for first-time buyers.

“Many lenders are likely to be looking to get new borrowers into their mortgage books. Especially as older borrowers are likely to be coming to the end of their mortgage term, it seems prudent for lenders to replace them with new customers.”

Nelson points out that even with the rate falls, the rates these borrowers face remain significantly higher than those on offer at smaller LTVs.

“For example, the average two-year fixed rate at 90% stands at 2.65% today – meaning borrowers who are able to save the extra 5% could save a whopping £153.22 a month, or £1,838.65 a year,” she adds.

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