MAB’s research of FTB best buy rates showed three-year variable deals are catching up with two-year products in terms of affordability and may prove to be the best option for first-timers. It revealed they have come down from a peak in Autumn 2004 and are now better value relative to the SVR.
Conversely, although five-year rates have dropped sharply following the Base Rate cut, they are only just returning to the levels they offered a year ago and remain less affordable than two and three-year deals.
The research compared the monthly repayments of two, three and five-year best buys for a £100,000 mortgage and showed that currently two-year variables average at £541.18, three-years at £542.30 and five-years at £572.40.
The past year has seen two-year rates remain steady, three-years consistently dropping while five-year rates have risen despite the level Base Rate until August.
Brian Murphy, head of lending at MAB, said: “Although the rate cut prompted lenders to drop their rates, three-year variables had already seen a marked reduction over the previous months. The three-year market has seen a number of lenders offering best buys over the past year, perhaps suggesting a more open marketplace.”
Rod Murdison, proprietor of Murdison & Browning, said this was not only the case for FTBs. “If the difference between two lenders’ rates is miniscule, some crystal ball gazing is necessary.
“If there would only be a plus or minus 1 per cent variation over the next three years then it would be best to defer remortgaging costs and choose the longer discounted or tracker variable rate.”
