'Best Fixed Mortage In History' Goes On Offer

Increased competition between lenders and ultra-low base rates from the Bank of England has allowed one company to offer a five-year mortgage with a fixed interest rate of just 1.99%.

Experts believe the mortgage, which will be offered by HSBC from Monday, is the lowest deal of its kind in history – but borrowers must pay £1,499 and have a 40% deposit.

Records show that typical interest rates on five-year fixed-rate mortgages have tumbled in recent times. Back in 2010, the average was 5.87% - compared to 3.55% today.

Other lenders have also claimed they are offering their lowest rates ever, with the Yorkshire Building Society slashing the interest on a two-year fixed-rate mortgage to 1.18% for borrowers with a 35% deposit.

According to Money Facts, the financial information website, the cost of borrowing is likely to remain low for some time yet.

Spokeswoman Charlotte Nelson said: "The competition to be the lowest in the mortgage market shows no signs of stopping and is great news for borrowers.

"Moneyfacts.co.uk has seen 15 providers cut rates across their ranges in the past seven days alone. Lenders want to appear in the 'best buys' so they are constantly reducing rates to remain competitive."

Mortgage availability is also expected to increase in the coming quarter, with many lenders telling the Bank of England that they are more willing to help consumers with deposits of less than 10%.

Such deals could also be a relief for current homeowners, according to Halifax. For the average household, annual net income has fallen by £15 in the past 12 months, while typical mortgage repayments have increased by £613 over the same period.