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Mortgage Rates Are Low, But Remember History


As we continue in this period of low rates which, according to the latest views from most economists will see no rate rise until 2019, it is easy to get rather nonchalant about the low rates on offer.

It always amuses and frustrates me in equal measure when a client screws their face up at the mention of a sub-2% rate as seeming a little high when, historically speaking at least, these rates are absolutely crazy.

So, with the cost of 2-year money falling again this week to stand at just 0.54% and 5-year money at 0.77%, I delved back into the archives and found an article I wrote some 10 years ago to put this in context.

At that point, 2-year money stood at 5.85% and 5-years at 5.66% – some difference!

Looking at the corresponding rates at that time we were waxing lyrical about a 2-year fixed at 5.89% and 5-year fixed rates at 5.69%. There was also an “impressive” 10-year fixed rate from Woolwich at 5.59%. How times have changed!

Fast forward to today and with 2-year fixes available at 1.03%, (3.35% APRC) and 5-year fixes from 1.59%, (2.93% APRC) you can really see why First-Time buyers are keen to take advantage. As for the 10-year fixes, well these now stand at 2.49%, (2.99% APRC).

Even Buy-To-Let products are now available from just 1.28%, (4.01% APRC) for a 2-year fix.

Of course, there is another side to this. The fact that history tells us that these rates should not be taken for granted and to be aware that they can easily move upwards towards more historical levels once more, is realistic at some stage. The key question is that we just do not know when that “some stage” will come.

For the time being at least, this does not look like being any time soon.

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