Mortgages have never been cheaper
Interest rates on mortgages are now lower than ever before, according to official figures.
Mortgage deals are the cheapest they've ever been since the Bank of England began keeping records. The average loan rate is 3.55%, having dropped considerably despite the fact the base rate hasn't moved in more than two and a half years. In March 2009, when the Bank of England first cut the base rate to 0.5%, the average mortgage rate was 4.08%.
Fixed and tracker mortgages are at record lows too, with the average fixed-rate mortgage deal sitting at 4.09% and trackers at 2.86%.
But while the mortgage market may be offering very attractive headline rates, most of us aren't eligible for them. The only people enjoying these super-cheap mortgage deals are the wealthy as mortgage lenders are asking for increasingly large deposits.
"Mortgage lenders have been scrapping for the best buy positions in recent months," says David Hollingworth, spokesperson for London & Country Mortgages in Bath. "However, there remains a need for a big deposit in order to open up the very best mortgage rates. Pulling together an adequate deposit remains the biggest hurdle for many prospective buyers."
With the best mortgage deals reserved for people who can stump up a 30% deposit, most people are left out. A fact reflected in the latest mortgage approval data.
The number of people approved for a new mortgage in August rose by 6% to 52,410, according to the Bank of England. This is the highest number since December 2009, but lending will have to almost double before we are back to pre-financial crisis levels when around 100,000 mortgages were being approved each month.
Rising approvals reflect the "exceptionally competitive fixed rates on the market at present," says Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau.
The number of remortgages is increasing faster – they rose 10% to 34,688 last month – as those who've built up some equity in their home have sought to take advantage of the cheap deals.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.