Average two-year fixed rates have fallen further in recent weeks to an average of 6.39%, according to Moneyfacts.co.uk.
Average fixed rates previously peaked at 7.08% at the beginning of July but have gradually fallen as money market costs fell.
Moneyfact’s says the reduction in fixed rates will soften the blow for homeowners who need to remortgage, but warns mortgages are still much more expensive than they have been in recent times.
The 6.39% average is the same as the levels seen a year ago at the beginning of the credit crunch, but Bank of England base rates were 0.75% higher at that time.
Michelle Slade, analyst at Moneyfacts.co.uk, comments: “The average rate is a good indication of what is going on in the market, but what is more telling is what the largest lenders have done with their rates, as the top ten lenders make up 77.2% of the mortgage market.
“The best news for consumers is that the UK’s biggest mortgage lender, Halifax has passed on the biggest cut in rates to borrowers and unlike other lenders, the average fee on these deals has also dropped.”
Other major lenders, including HSBC and Abbey have also cut their fees and interest rates, while Cheltenham & Gloucester and Bradford & Bingley have offset rate cuts with higher fees.
Government owned lender Northern Rock has increased its average rate slightly, up from 6.81% in early July to 6.82% today, and has also hiked its fees by £500 to £1,495, indicating it does not want to lend at present.
“The cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months and we are now seeing some relief for borrowers who are looking for a new deal,” explains Slade.
“The increase in borrowers'monthly repayments should not be as much as it would have been had they remortgaged two months ago, which will hopefully mean more borrowers can afford to remain in their homes.”
However, Slade warns rates are unlikely to fall to the levels seen in late 2006 and early 2007 without further cuts in base rates.
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