Mortgage rates are falling below two percent and houses are on the market for £5,000. Is this the best time to buy a house? Kathryn Gaw investigates

MORTGAGE rates have never been lower, despite the fact that there is supposed to be a housing crisis in Britain at the moment.

Last week, Chelsea Building Society announced plans to launch a rock-bottom mortgage rate of 1.74 per cent, for buyers with a 40 per cent deposit to offer.

This is set to usurp the Norwich and Peterborough 2.24 per cent two-year fixed rate as the best deal on the market, but competition is fierce.

HSBC has just rolled out its lowest ever five-year fixedrate mortgages, at 2.78 per cent, and Virgin Money has just reduced prices on its residential mortgage range by 0.06 per cent, meaning its twoyear fixed-rate product is now available at only 2.28 per cent.

This is a huge shift from only five years ago, when buyers would be hard pushed to find a fixed rate of less than five per cent.

Sylvia Waycot, editor at Moneyfacts.co.uk, says that over the past five years, the UK mortgage market has changed beyond recognition.

As the financial crisis was about to hit in 2008, first-timebuyers had the advantage in the mortgage market, with 957 products available to people with a ten per cent deposit.

But within a year, this had dropped dramatically to only 89 products, and today there are only 351 mortgages on the market for 90 per cent loan-tovalue (LTV).

By contrast, there are more than 500 mortgages available today for people with a 40 per cent deposit, up from 24 in March 2008.

In January, remortgage lending rose to £2.9bn, up 6.2 per cent on December’s £2.7bn.

In fact, according to the Council of Mortgage Lenders, remortgages now account for as much as 28 per cent of gross mortgage lending. This is certainly good news for homeowners, but how do you access the best rates?

There has probably never been a better time to remortgage, so even if you are midway through a competitive fixed-term deal, shop around and you may be surprised at the savings you can make.

If you don’t own your house, this may be the perfect time to enter the market.

To access the best mortgage rates, you will need to have a decent deposit, but there are plenty of cheap homes available at the moment, particularly if you are handy with a toolkit.

Last year, a three-bedroom, semi-detached house in Stockton claimed to be Britain’s cheapest property when it went up for auction with a starting price of only £750. It sold for £14,000.

According to property website Zoopla, there are hundreds of places being sold for £30,000 or less across the UK.

You can buy a dilapidated grade II-listed building in Hartlepool for only £10,000, or a two-bedroom chalet overlooking a lake in Lochgoilhead in Scotland.

In Grimsby, a two-bedroom flat is going under the hammer on March 14 for £10,000, and a £12,000 two-bed in Peterlee is being auctioned the same day.

Meanwhile, in Belfast, there are several properties up for auction at £5,000.

Outside of the auction houses (which usually insist on full cash purchases), there are a variety of cheap properties eligible for the most competitive mortgage rates.

To take advantage of Chelsea Building Society’s 1.74 per cent rate on a £30,000 property, you would need a 40 per cent deposit, or £12,000, as well as the £1,695 product fee.

On a ten-year mortgage deal, you would be making mortgage payments of only £152 per month, for the first two years at least.

But if you want to capitalise on these low property prices and mortgage rates, you have to act soon. The latest Halifax Housing Price Index suggests that a slow recovery is under way, with house prices in the UK rising by 0.5 per cent last month, and 1.9 per cent over the year to date.

The average house price in England and Wales is now £229,544, only one per cent off its previous peak in February 2008.

Meanwhile, if the Bank of England raises the 0.5 per cent base rate or decides to employ quantitative easing, there will be less of an incentive for banks to raise funds by competing on the mortgage market.

With fixed mortgage rates hovering about the two per cent mark on a regular basis, and homes available for as little as £5,000, surely the market can’t get much cheaper?