Mortgage borrowers were handed yet cheaper rates last week after a loan costing 1.14pc was launched by Yorkshire Building Society.
The interest is the cheapest on the market for a two-year fix. It edges rates closer to the all-time low for this type of deal – 1.05pc from the Post Office seen in August.
Borrowers need a 35pc deposit to get the Yorkshire mortgage and must pay a £1,345 fee. That charge, combined with the need to pay valuation and legal fees, mean other deals with higher rates could work out cheaper.
Norwich & Peterborough Building Society currently offers a comparable loan at 1.49pc with a fee of £195 which may cost less, depending on the sum borrowed.
Mortgage rates have been falling across the board. While some predict house price falls thanks to government changes that may reduce demand from buy-to-let landlords, prices have continued to rise thanks to the lower borrowing costs.
Market expectation for the first rise in Bank Rate
Photo: Capital Economics / Datastream
Rachel Springall, from financial researcher Moneyfacts, said: “The market rates for the lenders have been falling so I don’t think this the end of mortgage price falls. Everyone is watching for a turn in rates.”
Lenders base their prices on the money markets, which are influenced by gilt prices and expectations of when interest rates may rise. Recent economic weakness has pushed forecasts of a rise further away.
Money markets imply that the first increase will come in August 2019, following dramatic movements in the market in the past few weeks.
A year ago, a rate rise was considered likely by the end of 2015. Now markets are pricing in a 50pc chance of a rate cut this year.