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Your support makes all the difference.The interest charged on short-term fixed rate mortgages fell to a record low during May as lenders passed on reductions in their own funding costs to borrowers, figures showed today.
The average cost of a two-year fixed rate deal dropped for the third consecutive month, falling by 0.19% to stand at 3.47%, according to the Bank of England.
Interest charged on tracker mortgages remained at their record low of 3.45%, while there was also a fall in the cost of five-year fixed rate deals, with the cost of these now averaging 5%.
The downward momentum on mortgage rates appears to have continued into June, with a flurry of lenders slashing their rates during the past few days, including big names, such as Halifax, Nationwide, Lloyds TSB and NatWest.
The reduction in the price of fixed rate mortgages is being driven by a fall in swap rates, upon which the deals are partially based, as the Bank of England's Monetary Policy Committee is widely expected to put off raising the base rate until the final quarter of this year.
There has also been a further improvement in the number of mortgages available to people with only small deposits, with 31 different loans now available for people with 5% to put down, up from 24 at the start of the year and the highest level since December 2008.
Choice for people with deposits of 10% has also risen to 244 from 199 during the same period, while there are now 545 mortgages available for those borrowing 85% of their home's value, compared with 480 at the start of the year.
David Hollingworth, of mortgage brokers London & Country, said: "The expectations for interest rate rises have diminished, so the funding costs for lenders have dropped back, and they are passing that on."
He said best-buy deals for people looking to fix for five years had fallen below 4% again, while two-year mortgages were available for just over 3%.
Yorkshire Building Society currently has the most competitive two-year fixed rate mortgage at 2.99%, for people with a 25% deposit who pay a £995 fee.
The group also has the best five-year deal at 3.99%, based on someone borrowing up to 75% of their home's value and paying a £995 fee.
Although market conditions still remain difficult, the Council of Mortgage Lenders recently predicted that lending levels would increase this year for the first time since the credit crunch struck.
The group has raised its forecast for net lending, which strips out redemptions and repayments, by 50% from £6 billion to £9 billion for 2011, increasing to £12 billion in 2012 as the recovery continues.
The group said lenders appeared to have made good early progress in repaying government support schemes, and refinancing wholesale funding, while credit conditions had eased a little.
But although the rise would be the first increase since 2006, lending levels remain just a fraction of the £110 billion that net lending totalled that year.
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