This week’s absolute best fixed rate deals

Thursday, 30 October 2014
The possibility of a change to the Bank of England base rate has been ongoing all year. Predictions of when it will move have almost become a sport, but suddenly the banks and building societies have stopped speculating and are instead shoring up their defences. This means that we are starting to see some really low fixed term deals, such as the ones below. But why are lenders acting now rather than later?

The lowest fixed rate mortgage deals 

Lowest two-year fixed mortgage deals
Lender Rate SVR Maximum LTV Fees
HSBC 1.49% 3.94% 60% £1,999
Chelsea BS 1.55% 5.65% 65% £1,675
Yorkshire BS 1.57% 4.99% 65% £975
first direct 1.59% 3.69% 65% £1,950
TSB 1.59% 3.99% 60% £2,260
Correct as at 28.10.14 Source:
Lowest five-year fixed mortgage deals
Lender Rate SVR Maximum LTV Fees
Skipton BS 2.65% 4.95% 50% £1,995
Woolwich from Barclays 2.75% 4.99% 65% £1,999
Virgin Money 2.79% 4.79% 60% £1,594
Tesco Bank 2.79% 4.24% 60% £1,495
West Brom BS 2.79% 5.84% 65% £599
Correct as at 28.10.14 Source:

Your mortgage provider is scared you’ll leave…

This week at Moneyfacts we have analysed the changes in fixed rate mortgages versus those of variable deals and the results clearly show us that the mortgage market is undergoing a period of intense preparation, with fixed rates falling dramatically in the last month as providers look to improve their offerings ahead of a base rate change.

Since BoE base rate dropped to its historic low of 0.5% in March 2009, many borrowers exiting a fixed rate have found it cheaper to remain on a lender’s standard variable rate (SVR) rather than take on a more expensive fixed rate. The Council of Mortgage Lenders has said that as many as 67% of today’s mortgages are on SVR, which means a large portion of the market could change mortgage provider at any time.

Lenders must protect their mortgage books and are therefore concerned that when BoE base rate rises (and with it SVRs), borrowers will look for better deals from competitors’ fixed rates.

Consequently, the battle to own the fixed rate mortgage market has begun, with the average two-year fixed rate falling by 0.25% in the last two months to stand at 3.27%, a significant drop from the 3.52% recorded in August.

Choice leads the way

Alongside falling fixed rates, product choice is also on the rise, another indication of the importance lenders are putting on retaining customers. The number of fixed rate mortgages on offer has risen by 297 since September, while in the variable market products have only risen by 10 as lenders are reluctant to add to a variable book that does not lock borrowers in.

The remortgage market will witness a considerable boost in activity when base rate does eventually change. Many borrowers will look for a fixed rate to shelter from further increases, and many will look at starting a new relationship with another lender. This is what is driving lenders to start planning now to protect their lending books and their market share by enticing their SVR borrowers to stay put.

Clearly, the focus is squarely on preparation in the hope that when borrowers do look to remortgage, they’ll head for a low fixed rate product offered by their current provider.

Rates are being cut considerably, and in many cases, lenders have made more changes in recent months than they have done in the last few years. It is fixed rates that are becoming increasingly dominant, and increasingly lower-priced, as lenders strive to be seen as offering the best rates.

This level of activity is expected to continue as the prospect of an increase to base rate looms, with such intense competition potentially fuelling further fixed rate reductions as the market readies itself. This is great news if you are looking for a mortgage, and definitely a boon if you want to remortgage.