The research of first-time buyer (FTB) best buy rates shows that three-year variable rates are catching up with two-year variable rates in terms of rates.They have come down from a peak in autumn 2004 and are far better value today relative to the Standard Variable Rate (SVR).
Conversely, although five-year variable rates have dropped sharply following the base rate cut, they are only just returning to the rates they offered a year ago and remain less affordable than two and three-year variable rates.
Comparing the monthly repayments of two, three and five-year best buys for a £100,000 mortgage shows that currently two-year variable rates are £541.18, three-year are £542.30 and five-year are £572.40 per month.Three-year rates have been dropping quickly since April and have caught up with two year rates in terms of affordability.Two and five-year rates saw a drop following the base rate cut having remained virtually static for six months.
The same players dominate the first-time buyer best buy mortgage tables.Only nine companies feature in the tables over the last year.
The past year has seen two-year variable rates remain steady, with the exception of a spike in January.Three-year variable rates have consistently dropped over the period while five-year variable rates have risen, despite the level base rate until August this year.Following the 0.25 per cent base rate cut in August, all repayments dropped sharply as lenders lowered their rates in response.
Between August and November 2004 five-year variable rates outperformed three-year variable rates, but from November three-year variable rates have recorded a steady downwards path to improve their attractiveness.While two-year rates have returned to their most favourable rates following the base rate cut, they spent most of the year above the rates they offered from September to November 2004.All rates are more favourable in comparison to the SVR than they were a year ago, although five-year variable rates are only marginally so, having increased their rates in February and March and holding them at a similar level over the summer.
Brian Murphy, lending manager at Mortgage Advice Bureau, commented: “This research illustrates clearly the movement within the first-time buyer mortgage market.Although the base rate cut prompted lenders to drop their rates, three-year variable mortgages had already seen marked reduction in rates over the previous months.This may have been due to lenders factoring in a probable base rate cut in advance, but also reflects the competitive spirit of the market, as providers aim to make their products as attractive as possible.While Portman has dominated the two-year variable market, the three-year variable market has seen a number of lenders offering best buy rates over the past year, perhaps suggesting it is a more open marketplace.”
