The average two year fixed rate mortgage has fallen to the cheapest level since June, at 4.99 per cent, dropping below the five per cent mark for the first time in five months.
According to market analysis from Moneyfacts.co.uk, the cost of the average fixed rate mortgage rose rapidly in the summer, peaking at 5.12 per cent by the end of July, but has taken a lot longer to come back down.
And, there is no good news for borrowers who are looking for a longer fixed rate period, as the average three year fixed rate has increased to 5.58 per cent in recent months while two year fixed rate mortgages have fallen.
Commenting on the fixed rate mortgage market, Michelle Slade, spokesperson for Moneyfacts.co.uk, said: "Borrowers are finally starting to see more positive news coming out of the mortgage market. Falling rates on popular two year fixed rate mortgages, occurring against a backdrop of lenders raising the maximum LTV on their most competitive deals suggests that competition is increasing."
Mortgage lenders seem to have become accustomed to the new environment following the global financial crisis, Ms Slade explained, which can be seen in a relaxing of their lending criteria. But, while swap rates have been falling in recent weeks, medium fixed rate mortgage costs have yet to follow suit.
"Borrowers will be hoping the easing of credit criteria continues and that lenders will start to reduce the large margin for risk they have been taking over the last year," she added. "While it may still be too early to say the worst is over, the signs are all there."
Fixed rate mortgages have fallen in popularity in recent months, as borrowers have turned to tracker mortgages due to interest rates remaining static at their record low of 0.5 per cent, with few industry commentators expecting to see them rise again until well into 2010.
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