The National Mortgage Index – using data from Moneyfacts.co.uk – shows average 2-year tracker rates dropped by 0.28% in the three months to November 2014, the biggest autumn price cut on record for these products.
It meant that 2-year tracker rates have fallen by more than half a percent (0.51%) in the last year to reach a new post-2007 low of 2.38% in November, beating October’s previous record of 2.51%.
Average 2-year fixed rates fell 0.27% in the three months to November – the biggest autumn price drop since 2008 – to a record low of 3.44%.
Three year rates also reached a historic low of 3.52% having dropped 0.27% since August: the biggest autumn discount since 2012 under the Funding for Lending Scheme.
Fixed rate products remain the most popular choice for borrowers, but with 2-year tracker rates falling further than 2, 3 or 5-year fixed rates over the last year, there has been a slight shift in borrower behaviour.
November 2014 saw 92% of homebuyers applying for fixed rate products compared with 94% a year earlier, while 87% of remortgaging homeowners opted to fix compared with 93% in November 2013.
And falling rates are resulting in significant monthly savings for consumers. Buyers who opted for the average 3-year fix in November will save £144 a year on repayments during their fixed period compared with October’s average rate.
Those with a 5-year fix or 2-year tracker rate will pay £120 a year less towards their mortgage, while consumers with a 2-year fix will save £72 annually.
The savings are even more significant compared with November 2013, with the annual cost of a 2-year tracker having dropped by almost £500 (£492).
Borrowers who took out the average 3-year fix in November 2014 will save £372 a year compared with those who did the same in November 2013.
Only those taking out a 5-year fix in November 2014 will pay a higher rate and face higher repayments than they would have done a year earlier.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Fierce competition between lenders has led to an all-out mortgage rate war, with 2-year fixed, 2-year tracker and 3-year fixed rates all at record lows.
“This is resulting in tangible monthly savings for consumers, particularly compared to this time last year.
“There may be room for further discounts, but as we edge closer to an interest rate rise – currently expected in autumn 2015 – it’s likely that we will soon hit the bottom of the curve.
“Consumers playing the waiting game could therefore risk losing out on the most competitive deals.
“Fixed rates remain the product of choice among most consumers and are likely to become even more popular as the Bank Rate rise approaches. The typical borrower generally prefers to pay a slightly higher premium for greater long term security.”
