Borrowers have been able to enjoy some truly great conditions over the last year or so, with mortgage rates being on an almost continual downwards spiral to help those on all rungs of the ladder. It looks as though this could be an ongoing trend, too, with our latest research showing that average mortgage rates have fallen further this month to hit fresh lows once again – and much of it is due to the new found certainty in the mortgage market.
The figures show that the average two-year mortgage rate has fallen by 0.02% from January to stand at 2.54%, the lowest rate ever recorded, and marking a return to form following the lack of movement last month. It's a similar picture in the five-year sector, which saw the average rate fall by the same 0.02% to a new low of 3.25%, and marks another turnaround from the static rate of January.
But why the fresh cuts? Well, much of the activity coincided with Bank of England announcements that put speculation of a forthcoming base rate rise to rest, and this could have had a dramatic impact on the markets at large.
Essentially, the last few weeks have told us one thing – that base rate will stay put for at least the next year. Not only did members of the Bank's Monetary Policy Committee vote unanimously to keep base rate on hold last week, but Governor Mark Carney has given several sharp hints that the rate isn't going anywhere, which means we can say with almost complete certainty that UK interest rates will stay at their rock-bottom levels for some time.
This, understandably, had an impact on the mortgage market. It sent wholesale costs plummeting (SWAP rates have fallen considerably in both the two and five-year sector) and mortgage rates followed suit, because with interest rates staying put, there's far less risk from the provider's point of view, and they can offer lower rates as a result.
Average mortgage rates may have fallen overall, but it's particularly interesting to note that rates at high loan-to-values (LTVs) continue to lead the way in terms of rate cuts, despite these tiers also seeing a drop in product availability.
The overall number of mortgages available has remained fairly static this month and rose by just one from January (to 3,653), but this net figure hides far greater variation at LTV level: the total number of mortgages at 85% LTV fell by 30, for example, while the 90% LTV tier noted a nine-product fall.
At the same time, the average two-year mortgage rate at 90% LTV fell by 0.07% (to 3.01%), while the average 85% LTV rate saw the greatest cut of 0.08% (to 2.50%). The fact that these tiers continue to see rate cuts suggests that the products withdrawn were those with higher rates, and far from it suggesting a reluctance to compete, it actually infers that competition is becoming even keener and more concentrated at rate level – which means that first-time buyers, or those with a limited deposit, can benefit from some of the lowest rates ever.
Not only are mortgage rates already at record low levels, but there's the chance for them to fall further still in the months to come. The almost complete absence of risk, at least at wholesale level, could mean that providers are now able to compete solely on price, with the new found level of security encouraging them to offer rates at the absolute minimum – so it could get even better for borrowers from now on!
Of course, things are already pretty good, and you wouldn't want to miss out on some of the fantastic rates currently available in the hope of future price cuts. Nothing's guaranteed, after all, so if you're thinking of taking the plunge, start the process by comparing mortgage rates and see if you can take advantage of the certainty in the market.
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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