Review of the week: Post Office 2-year fixed rate mortgage 5.45%

Are you a first-time buyer looking for a mortgage or an existing homeowner who’s struggling to move or remortgage because you don’t have much equity in your property? If you are, the good news is that the outlook is improving.

We’ve seen a number of lenders launch more competitively priced mortgages available to those with deposits of 10% or 15%. The Post Office is one and last week it launched a market-leading two-year fix available for loans up to 90% of the property’s value.

Read on to find out more.

Review of the week: Post Office 2-year fixed rate mortgage 5.45%

There have been more changes in the mortgage market which represent good news for those who have been struggling to get a home loan.

Nationwide, Post Office and Yorkshire Bank have all unleashed new competitively priced products, including a number of mortgages available to those with small deposits.

The credit crunch and funding shortage hit first-time buyers and those with little equity in their homes hard. There’s been limited choice for those needing to borrow more than 80% of the property’s value, and the mortgages that have been available have had rates much higher than those for people with larger deposits.

However, things finally seem to be looking up and the Post Office is now offering mortgages up to 90% of the property’s value. Included in its new range is a market-leading two-year fix.

We take a look at the details…

What’s the deal?

Fixed for 2 years at rate of 5.45%, this deal is available to both first time buyers and existing homeowners who need to remortgage.

The main attraction of this product is that it is available to those who have a deposit of just 10% - this will bring a sigh of relief to those who are struggling to save a substantial deposit or who have little equity in their home. 

The arrangement fee is £999, which is about average, and this can be added to the mortgage if you can’t afford to pay it upfront. Bear in mind, however, that you’ll pay interest on it if you choose to add it to the loan.


Any catches?

You’ll have to pay an early repayment charge if you want to redeem the mortgage within the first two years. And the penalty is quite hefty – 3% of the outstanding balance. So on a £100,000 mortgage, that would equate to £3,000.

Once the fixed term is over, the rate will revert to the Post Office’s standard variable rate (SVR) of 3.49% - this rate is made up of 2.99% plus the Bank of England Base Rate which is currently 0.50%


It’s great to see some competition coming back to this part of the mortgage market and will be welcomed with open arms from first-time buyers especially.

Although the rates on these products are higher than the market-leading deals available to borrowers with larger deposits, it’s an indication that a once cautious market is opening up to the idea of taking on those that really need help in getting their foot on the ladder in an ever changing mortgage environment.

The Post Office is also offering fee-free deals for existing homeowners wanting to remortgage up to 90%, but they are at slightly higher rates over a five-year fixed period.

Click here to compare the latest mortgage deals.

Top Tip

If you can afford to get together additional funds to make your deposit more attractive then this would be a good option as rates are lower for those who have a larger deposit to put down.

And don’t forget, when assessing a mortgage application, the lender will check your credit file. If your credit history isn’t great (perhaps you’ve missed credit card payments in the past or struggled to manage debts) you are unlikely to qualify for the leading mortgage deals.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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