As rates fall, is now the time to fix your mortgage?

ColoursYorkshire Building Society has slashed the interest rates on its two and five-year fixed rate mortgages for borrowers with a deposit of at least 25%.

The new options include a two-year deal at 2.59% and a five-year deal at 3.49%, both of which come with a £995 arrangement fee, and a two-year fix at 2.79% and five-year loan at 3.69% with fees of just £95 (plus £250 cashback).
The latter options are aimed at cash-strapped borrowers keen to minimise their upfront costs, while the first two deals offer better value for those with larger mortgages who can afford to pay £995 at the outset.

Yorkshire's direct mortgage manager Chris Smith said: "We are committed to offering our members the best value for money and strive to keep our rates competitive.

"These fixed-rate deals are particularly attractive and have been introduced in response to demand from borrowers wanting the security of fixing the same regular monthly mortgage repayment, at a time when their household budget continues to be squeezed."

Yorkshire is not the only mortgage lender to have cut fixed rates recently, though. In fact, fixed-rate mortgages have become steadily cheaper over the last couple of years, with recent figures revealing that the rate on the average two-year product now stands at just over 4% - down from an average of 5.59% in early 2009 - while five-year products are at their lowest rate since January 2011.

Now could therefore be the right time to switch to a fixed-rate deal, especially if you are worried about the Bank of England base rate rising and pushing up your monthly mortgage payments. The rates you can get will depend on the size of your deposit, though.

While the Yorkshire mortgages described above are the market leaders for those with a 25% deposit, those with 30%, for example, would be better off with Woolwich two-year fix at 2.54% with a £999 fee and those able to raise no more than 15% of a property's value should to look at the slightly more expensive mortgages available from HSBC and Norwich & Peterborough.

And as well as comparing the rate and fee combinations on offer to get the best deal, you also need to think about how long you want to fix for.

Choosing a two-year fix, for instance, could prove a mistake if rates do start rising again over the next year or so as it may mean your payments shooting up when you come off the discounted rate.

Should you need to sell your home within five years, though, you could find yourself hit with hefty penalties for failing to see a five-year deal through to the end of the term.

If you are unsure which option would suit you better, it may therefore be a good idea to talk to an independent mortgage adviser who can help you to assess your situation.
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