Over the last few months borrowers have certainly been reaping the rewards of a highly competitive mortgage market, which has sent rates to record lows. However, new research by Moneyfacts suggests that this intense whirlwind of competition may be losing some of its energy.
Figures in the latest Moneyfacts UK Mortgage Treasury Report show that the average two-year fixed mortgage rate has fallen by 0.01% this month to stand at 2.54%, returning to the level last seen in February and making it the joint-lowest rate ever recorded. However, the report argues that this fall can't be attributed to rate cuts made in the name of competition, but was instead the result of a consolidation of product ranges.
This month, the overall number of mortgage products dropped by 90 to 3,497 products. This marks the third consecutive monthly fall and is the lowest level of availability seen since October 2014 (3,374). Unusually, these product losses were mainly focused on the fixed rate market, with higher loan-to-values (LTVs) being particularly affected; for instance, the number of fixed rate 90% LTV products fell by 22, while the product count in the 85% LTV sector fell by 29, with all fixed tiers at 75% and above seeing considerable losses.
So, the fact that the average two-year fixed rate still fell in spite of these product drops suggests that product withdrawals were mainly focused on higher-rate or mid-range products, so the fall in the average rate is less to do with an increase in competition than a consolidation of providers' product ranges.
This suggestion is backed up by the fact that overall product changes have decreased while the shelf life of products has grown. Over the last month providers have made 4,725 changes to their products, which is down 7% on March. Meanwhile, the average shelf life of a product, which is the measurement between when a product is launched and when it is withdrawn or changed, has increased to 43 days, up from 30 previously. Taken together, this all suggests that providers are trying to maintain their product output and are generally adopting a more cautious approach.
But why are providers taking their foot off the gas in terms of competition? Well, the report attributes this to uncertainties both at home and abroad: "Recent economic indicators (such as rising inflation and a slowdown in manufacturing) are bound to be impacting providers' pricing strategies," states the report. "Imminent uncertainty regarding both the UK and USA is having a particular impact, [and it seems that] many providers are reducing their output and steadying competition until a longer-term picture of the mortgage market becomes clearer."
So, it appears that things seem to be settling down in the mortgage market as providers adopt a "wait-and-see" mentality. This means that if you want to grab a highly competitive mortgage deal, now is the time to strike! Take a look at our mortgage best buys to hunt down the top offers and see if you can find the right deal for you before rates begin to creep up.
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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