2 and 3 year fixed rates at a record lows

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                <p>Short-to-medium term fixed rate deals have hit their
lowest ever level, according to Moneyfacts.<br><br>The average two-year
fixed rate in the UK was 4.36% in June, with three year rates at the
lowest on record at 4.95%.<br><br>The five year rate, at 5.37% is at its
lowest since January 2011 and swap rate trends suggest all fixed rates
could go lower still.<br><br>Louise Holmes of Moneyfacts said:<br><br>"A
fall in fixed mortgage rates is great news for borrowers who have
wrestled with high rates for many months. Lenders appear to be launching
more competitive deals and expanding their product ranges, with lower
rates and more high loan-to-value deals, however, strict lending criteria
and thorough credit checks remain in place."      <!--INFOLINKS_OFF-->

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<br>Ray Boulger, senior technical manager at mortgage broker John
Charcol, said fixed rates are hitting record lows because the view is
increasingly that Base Rates won't change until next year.<br><br>"But I
still think it makes sense to go for a five-year fixed rate to buy
security for a reasonable term. I still think the tipping point will be
when a good selection of five year fixes sit below 4%," he
said.<br><br>Currently, there are just three five-year deals under 4%,
including Chelsea Building Society with the lowest five-year fix at
3.89%, Yorkshire Building Society offering 3.99% and The Mortgage Works
also offering 3.99%, with a 2% fee.</p>
<p>The good news for homeowners is that competition in the short term
fixed rate mortgage market has increased significantly in recent months
to meet this demand. So much so, that according to the Bank of England,
the cost of short-term fixed rate mortgages fell to a record low during
June. The average rate charged on a two-year fixed rate deal for someone
with a 25% deposit dropped to 3.67% during the month, down from 3.78%,
the lowest level since records began in 1995.<br><br>So that just leaves
the question of why homeowners looking for the security of a fixed rate
would choose to opt for a shorter term fix over a longer term deal.
Ultimately, it's down to customer choice and many borrowers simply prefer
to lock into a shorter term fix rather than a longer term deal.</p>

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