Two-year fixed rate average falls to 6.39%

Financial website, Moneyfacts.co.uk, has reported that the average interest rate charged on a two-year fixed-rate home loan now stands at 6.39%, down from a peak of 7.08% at the beginning of July.

Michelle Slade, analyst at Moneyfacts, has confirmed that rates on this popular type of mortgage have returned to the levels seen just prior to the onset of the credit crisis.

However, no direct comparison is possible because the Bank of England’s base rate has fallen to 5% since last summer, having peaked at 5.75% in July of 2007.

Turning to individual lenders, Halifax has passed on the biggest cut in rates on its two-year fixed deals, while at the same time reducing average fees.

Bradford & Bingley and Cheltenham and Gloucester have also passed on significant cuts, but average fees have increased slightly.

Northern Rock continues to deter new and existing customers; the bank’s rates for two-year fixed loans have not changed significantly but fees have increased by £500.

According to Ms Slade, the cost borrowing on the money markets has dropped significantly in the last few months and borrowers looking for a new deal will feel the benefit.

Discuss this in the Finance Markets forums

Story link: Two-year fixed rate average falls to 6.39%