Mortgage rates could drop further

The interest rates charged on mortgage loans could fall further this year.

The Centre for Economics and Business Research (CEBR) is predicting a slowdown in UK economic growth as a result of yesterday’s Budget, which it says could result in the Bank of England Base Rate staying at its current level of 0.5% until the end of 2012.

The continuing low Base Rate could prompt lenders to reduce mortgage rates from an average of around 4% to 3% by early next year, according to the CEBR.

The news comes hot on the heels of a report from data website Moneyfacts, which revealed that mortagage rates have fallen to a seven year low.

The average rate on a two-year fixed rate mortgage deal now stands at 4.52%, its lowest level since September 2003.

The cost of fixed rate mortgage deals has been falling since September last year.

Among the best two-year fixed rate mortgages currently available are a deal from The Co-operative Bank at a rate of 2.95% and a deal from HSBC at 2.99%.

Yorkshire Building Society also offers a two-year fixed rate mortgage deal at 3.05%.