Lowest-ever 10-year mortgage deals are being offered amid plunging inflation and the expectation that interest rates may now stay low for longer.
Lower fuel prices have pushed the UK’s rate of inflation down to a 12-year low, the Office for National Statistics stated on Tuesday (December 16).
The Consumer Prices Index inflation measure – which assesses the cost of basic household goods – fell to a rate of 1% in November, from 1.3% in October.
It is being hailed as an early 2014 Christmas present for consumers, but some investors are concerned that it could slow the UK’s economy, as people delay purchases, expecting prices to fall even further.
The drop in inflation to 1% has led to speculation that the first rise in interest rates, which was being anticipated for some time in 2015, may now not happen until 2016.
Some banks and building societies are now offering decade-long mortgage deals at prices not seen before.
“The battle to keep mortgage borrowers on side has moved on from the popular two and five-year fixed rates to an explosion of 10-year deals, which have increased from just 12 in November 2013 to 52 today,” revealed Sylvia Waycot of data providers Moneyfacts.
The Santander deal jumps ahead of a 3.45% rate from Woolwich, but mortgage expert Ray Boulger of John Charcol advised borrowers to wait for even better rates to emerge in the coming weeks. “The 10-year gilt is down from 2% to 1.71%, falling eight basis points this morning alone. We can now expect to see further cuts in five and ten-year mortgage rates.”