Two-year fixed rate deals at 0.6 per cent below base rate

With six rises in the Bank of England base rate over the past three years, borrowers with soon-to-expire fixed rate mortgages could be forgiven for thinking they’re in for a nasty shock.

However, although the higher base rate means fixed rate deals are more expensive than recent years, analysis from moneysupermarket.com shows margins between the base rate and the best fixed rate mortgages have scarcely been better. Indeed, there are a number of products with interest rates significantly lower than the base rate.

In May 2004, the best three-year fixed rate mortgage was 4.99 per cent from Derbyshire Building Society – 0.74 per cent above the base rate of 4.25 per cent. Despite the base rate rising 1.25 per cent since then to 5.5, the best three-year fix is now at 5.19 per cent (from Portman Building Society), just 0.2 per cent higher than May 2004’s best deal.

In May 2005, when the base rate was 4.75 per cent, the best two-year fixed rate mortgage was 4.68 per cent from Derbyshire BS. Borrowers today may only be 0.22 per cent worse off, with Portman BS offering a two-year fix at 4.9 per cent – or 0.6 per cent below the base rate.

Louise Cuming, head of mortgages at moneysupermarket.com, said: “The message is clear – borrowers needn’t panic!

"While it is true monthly payments will be slightly higher for those remortgaging now, they are getting an outstanding deal when viewed with the base rate in mind.

“With fixed rate mortgages on the market at 0.6 per cent below the base rate, this is a much better time for those coming to the end of their current fixed rate deal than many would have expected.”