Five-year fixed-rate mortgage rates getting lower

By Joel Stanier

If you're considering buying or moving home, and you're looking to stay put for the next five years, a five-year fixed-rate mortgage deal could be an ideal option.

Fixed-rate mortgage deals protect homeowners against the interest rate increases that can affect tracker and variable-rate mortgages from time to time - although they do tend to be a bit more expensive to begin with.

In general, homeowners will pay a higher interest rate the longer their mortgage deal is 'fixed' for. But recently, a few very competitive five-year deals have entered the market.

Chelsea Building Society has launched what it says is the lowest-ever five-year fixed-rate mortgage deal, with an interest rate of 3.19%. Borrowers must have at least a 30% deposit, however, and there is an arrangement fee of £1,495.

Meanwhile, both The Co-operative Bank and Yorkshire Building Society offer a five-year fix at 3.39%, available for a minimum 25% deposit and a £990 arrangement fee.

This is good news for homeowners, as a rate this low on even a two-year fix would have been difficult to find just a few months ago. Having said that, the rates available on the best tracker mortgages are still much better: HSBC currently tops the table on MoneySupermarket.com with an interest rate of just 1.99% (for two years, with a 40% deposit and £1499 arrangement fee).

And with experts currently predicting that the next base rate increase might not come until 2015, there's a chance that tracker mortgage rates will remain unchanged for at least the next two to three years.

A mortgage expert at Think Money commented: "Choosing between a tracker or a fixed-rate mortgage is never easy, as you're essentially guessing whether interest rates are likely to rise significantly in the next few years.

"Homeowners could choose a tracker mortgage if they want lower rates for the time being, but are prepared for potential increases in the future.

"On the other hand, homeowners on a fixed-rate deal know exactly how much they're paying for the next few years - and given that the next five years will be very hard to predict, the latest fixed-rate deals could be a very attractive option."

Tags: mortgage, mortgages, mortgage deal, fixed rate mortgage, tracker mortgage, interest rate, base rate, variable mortgage, HSBC, MoneySupermarket, Chelsea Building Society, Co-operative Bank, Co-op, Yorkshire Building Society, homeonwer

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