Recent analysis of the mortgage market suggests that now may be one of the best times ever to take out a mortgage, as interest rates for borrowing continue to drop.

In some cases rates have nearly halved over the past year due in part to a competitive price war between lenders. 

Following major changes to the mortgage market, including the Mortgage Market Review (MMR) and the Loan-to-Income cap, lenders have struggled to satisfy demand. As a result, figures show that home loans fell by more than a fifth in November 2014 compared to January that year. Lenders are now trying to make up for this loss with low interest deals and possibly even a modified interpretation of the MMR.

Simon Checkley, managing director at Strutt & Parker’s recommended mortgage brokers Private Finance, said: “Given a base rate rise will happen at some point, it is unlikely that these rates will be bettered in the years ahead. That said, given the interest rate yield curve has 10 year money at around 2%, the outlook for mortgage rates remains favourable.”

The low interest rates are also playing their part in the affordability of mortgages, although lenders are required to “stress test” affordability at rates in excess 5%. There is concern among some industry analysts that a rise in interest rates could destabilise the UK’s economic recovery.

Many are hoping a rise in the Bank Rate by the Bank of England can be put off until next year. In light of recent inflation figures, the governor of the Bank of England, Mark Carney, has even suggested that the base rate might fall further from its current level at 0.5% before rising.

Mortgage lending rates could potentially get even lower within the next six months as the price war continues and new lenders enter the market.  Figures from the Bank of England show that the typical two-year fixed rate deal has fallen from 2.37% to 2.01% over the past year. This could save borrowers as much as £1,440 over two years assuming a £200,000 loan with a 25% deposit whilst promoting affordability and purchasing power.