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Cost of fixed-rate mortgages continues to drop

By Matthew Plant - Financial specialist

10 June2010

According to figures from the Bank of England, the cost of short-term fixed-rate mortgages dropped to a record low in May, as `competition continued to return to the market`, The Telegraph reports.

The average rate charged on a two-year fixed-rate mortgage for someone with a 25% deposit fell to 3.8% during May.

Interest rates charged on two-year fixed-rate mortgages have gradually dropped since September last year, when they were at 4.47%. They have now fallen to their lowest level since 1995 - when the Bank of England`s records began.

Meanwhile, the cost of servicing a five-year fixed-rate mortgage (for people with a 25% deposit) also fell during the month - dropping from 5.5% to 5.39%, reaching their cheapest level since May 2009.

Spokesperson for Moneyfacts.co.uk, Darren Cook, said: "The fact that rates are coming down is good news for borrowers. Lenders are more comfortable with the new landscape of the mortgage market, and we are seeing an appetite to lend and compete against each other on best buys, something we haven`t seen in the market for some time."

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Tags: fixed rate, mortgage, fixed rate mortgage, cost, cost of mortgage

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