Well, it's happened again – average mortgage rates have fallen for a further month to reach the lowest on record! This has been fuelled by intense competition in the market, and happily, this intensity is apparent across the board, as providers seek to attract customers at all borrowing levels.
Let's start by looking at availability. Moneyfacts' figures show that product numbers rose by 175 this month to stand at 3,956, the second-highest total seen since we began recording this measure in 2007. Notably, this increase in product choice can be seen across the majority of loan-to-value (LTV) tiers, ensuring that borrowers of all kinds are able to benefit.
Average rates reflect this level of competition. The average two-year fixed mortgage rate has posted a considerable reduction of 0.08% this month – the ninth consecutive monthly drop – to stand at a new record of 2.87%, and again, rates have fallen across the majority of LTVs. Average variable rates have also fallen, with the average two-year tracker rate down by 0.01% this month to 2.02%.
A similar pattern can be witnessed in the longer-term sector, following last month's finding that five-year rates are becoming a key area of competition (remember when we said that a five-year mortgage now costs less than a two-year deal at this point last year? It still holds true!). The overall five-year fixed rate fell by 0.06% to a new record low of 3.38%, and at the same time, the product count has increased.
This again shows that competition is broad-based and not confined to a single sector of the market, with analysis suggesting that that this is largely due to the economic climate: borrowers are increasingly aware of the prospect of an increase to base rate at some point in the next year or two, and they're seeking to fix their repayments for longer as a result.
Providers are accommodating this demand by improving availability, while the fact that they're also lowering rates – not only at short-term, low-LTV levels – highlights the fact that they're looking to compete at all angles to attract as large a section of the market as possible.
This is a clear shift from previous norms, as once upon a time, competition was concentrated in a few key areas. This was typically at the lower end (or the less risky end) of the LTV scale, but in the last few years, there's been a shift towards competition in higher LTV bands, arguably as a result of Help to Buy encouraging lending at traditionally higher-risk levels – great news for first-time buyers!
Now, things have changed. The figures show that there's no longer a niche area where providers are concentrating their attention, and instead, competition is broad-based, with product numbers increasing across the market and rates falling as a result. This combination ultimately means that the whole of the market can benefit, so why not take advantage?
Rates may be on a downwards spiral, but it can't last forever, and at some point, they'll start to pick up again. That means it's a great time to consider opting for a fixed rate deal, as you can fix your payments ahead of a rate rise and have a guarantee that they won't increase! Opting for a longer-term deal – perhaps a five or 10-year mortgage rather than the traditional two-year term – can give you that repayment certainty for even longer, so check out our best buys to see if there's a deal that'll work for you.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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