Cheap Fixed Mortgage

  Cheap Fixed Mortgage
This year rates have plummeted as lenders battle it out for a spot in the best-buy tables, pushing rates to record lows. Ten-year fixed rates fell below 3pc for the first time in February and five-year fixes fell below 2pc for the first time ever in April. 
And borrowers are acting quickly to secure these low rates. New figures from the Bank of England this week showed that the number of mortgage approvals increased by 6,131 from March to April, the biggest jump in six years. The last time the UK saw this rate of growth in approvals was in February 2009. 
Economists are forecasting a robust recovery in the housing market over the next few months, after a relatively slow start to 2015. 
Our guide tells you everything you need to know about fixed rate mortgages and the best deals available. It will be updated with the latest information as events change, so bookmarkwww.telegraph.co.uk/fixedrates 
You can also see more deals on our mortgage best buy tables. 
What affects fixed mortgage rates 
The pricing of fixed mortgage rates is dependent on several factors, but mostly whether banks can get their hands on cheap money to lend out. They usually get this from savers or by borrowing from other banks. They do this on money markets, buying money at a certain rate – the "swap" rate – for a certain time period. 
These swap rates react to expectations of future interest rates and inflation, which affect the price of mortgages. 
Two and five-year swap rates were driven down for much of 2013 so the price of fixed rate mortgages fell. But those swap prices increased towards the end of 2013 and in early 2014, and with them, the average cost of new fixed mortgage deals. 
But these have now dropped sharply and deals are as cheap as they've ever been - and still falling. 
• One minute mortgage check 
How have fixed rates changed? 
The Government's £80bn Funding for Lending Scheme, launched in 2013, handed cheap money to banks and building societies to lend on and they have done this mostly as mortgage lending. The scheme has also pushed down swap rates, as has the Bank of England's pledge to keep rates low for several years. 
Despite expectations that the first rate rise would happen last summer, economists now believe rates will remain at 0.5pc until well into next year. 
In January last year the Funding for Lending Scheme was redirected from mortgage lending to small businesses. As we have warned on this page, this should lead to fixed rate mortgage pricing rising. Brokers say there's still FLS money working its way through the system so rates probably won't react to the change until later this year. 
In the meantime, banks have been competing aggressively for mortgage customers by slashing their rates, particularly for five and 10-year loans. Both have fallen to new record lows.
David Hollingworth, of broker London and Country, said with funding costs having fallen and lenders competing hard for business, mortgage borrowers have never had it so good. 
"Rates have plummeted to new lows eclipsing the previous best in mid-2013 and it’s not just those with huge deposits that are seeing the benefits," he said. "Being able to fix at such low levels can offer significant savings now and also protect against rate rises in the future. 
"Borrowers still need to look beyond some of the eye catching rates as the very lowest rates can come with hefty arrangement fees. However lenders are catering for all types of borrower and will usually have a range of rate and fee combinations to suit every homeowner." 
What is the difference between fixed and variable rate mortgages? 
If you take out a fixed rate mortgage, the interest rate you pay will be fixed for the initial special period, regardless of rate changes made by the Bank of England. Fixed rates are typically two, three, five and occasionally 10 years, with the interest rate rising accordingly. Once the fixed period ends, borrowers are pushed onto the standard variable rate which can be much higher. 
Variable mortgage rates can vary during the mortgage term, meaning borrowers will not have the security of knowing how much their repayments will be every month. However, if the UK economy dips, interest rates will decrease, making the repayments substantially cheaper. Also, because the mortgage comes with the uncertainty of interest rates either rising or falling in the future, the initial rate is often much cheaper than with fixed mortgages. 
• Calculator: How much can I borrow? 
The cheapest fixed deals 
It's not all about rate. Lenders like to add extra charges, such as arrangement fees. 
We have calculated the full cost on some of the best deals based on a £350,000 home with a loan of 25 years. We used a buyer with a 40pc deposit - £140,000 - and a buyer with a 10pc deposit, or £35,000. 
For those who want the peace of mind of having a fixed monthly cost, and for anyone who doesn't want the risk of fluctuating interest rates, fixed rate mortgages are appealing. 
Below we list the best on the market, according to broker London and Country, using the two different deposits. 
Two-year fix 
Yorkshire Building Society offers the cheapest deal once you factor in the arrangement fee. 
•Yorkshire's 1.07pc deal comes with a £1,499 fee. Monthly repayments would be £798, or£20,654 over the two years, including the fee. 
• Tesco has a competitive two-year fix priced at 1.29pc with a £995 fee. Monthly repayments would be £819 and the total cost would reach £20,658. 
• Tesco also has another deal priced at 1.59pc, with product and completion fees of £195. Monthly repayments would be £849, or £20,566 over two years, including the fee. 
For those with smaller deposits of 10pc, or £35,000, the Post Office comes out on top. Its 2.59pc deal comes with fees of £1,495. Borrowers would pay back £1,427 a month, or £35,754for the total two-year term including the fee. 
Tesco has a 2.79pc deal, with a £995 fee. It would cost £1,460 a month, or £36,025 in total over the two years. 
Three-year fix 
Yorkshire Building Society is also offering the cheapest three-year deal. 
• Yorkshire BS is charging 1.64pc on its three-year fix, with a £975 arrangement fee. Total repayments would be £853 a month, or £31,710 over three years including the fee. 
• Norwich and Peterborough Building Society's three-year fixed rate at 1.99pc has fees of £195. Total repayments would be £889 a month, or £32,202 over three years including fees. 
• Chelsea Building Society is charging 1.59pc on its three-year fix with a large £1,675. Total repayments would be £849 a month, or £32,231 over three years. 
For those with a 10pc deposit, Yorkshire Building Society offers the cheapest deal with its three-year fixed rate mortgage at 3.29pc with a £975 fee. Repayments would be £1,542 a month, or £56,477 over the three years including the fee. 
Five-year fix 
• Natwest offers the best five-year fixed rate mortgage at 2.19pc with a £995 fee. The monthly repayments would be £910, and £55,574 over the term. 
• TSB's five-year fix costs 2.09pc. The product fee is £1,995. Monthly repayments would equate to £899, and £55,954 in total. 
• Tesco has a 2.39pc deal, with a £195 fee. The mortgage would cost £931 in monthly repayments, and £56,025 over the five-year term. 
For those with a 10pc deposit, Leek United offers the cheapest deal with its five-year fixed rate mortgage at 3.59pc. The product has an arrangement fee of £995. Borrowers would pay back£1,592 a month, or £96,528 over the period. 
Tesco offers a 3.89pc rate which comes with a £195 fee. Repayments would be £1,644 a month or £98,812 over the five years. 
Ten-year fix 
• Barclays has the cheapest 10-year fixed rate mortgage. Its 2.99pc deal comes with a £999 fee. Monthly repayments would be £995, and £120,369 in total. 
• TSB is charging 3.14pc with no arrangement fee. Monthly repayments are £1,011 and the deal would cost £121,344 overall. 
For those with a 10pc deposit, Nationwide has a 4.79pc deal, with a £999 arrangement fee. Monthly repayments would be £1,803 and £217,374 in total. 
If you’re considering fixing for 10 year don’t forget to factor in the effect of early repayment charges. Some deals are more expensive to end early than others.