Mortgage News

Despite not many changes happening in the mortgage charts this week, competitive rates remain at the top of all the charts, with low rates available across loan-to-value (LTV) deals. Saying this, it is important to remember that when looking for the best mortgage deal, the lowest rate might not be the best option. Instead, borrowers should take into account a wide range of factors when choosing a mortgage deal, including product fees, incentives and flexible features.

Competition in the five year fixed mortgage market has intensified over the last few years, resulting in more mortgage deals available for those who raise a minimum 25% deposit in the five year chart than the typically more competitive two year chart.

In fact, data in Moneyfacts UK Mortgage Trends Treasury Report (soon to be published) shows that there are currently 610 five year fixed rate mortgage deals available for those with a 25% deposit or more, which is 18 more than the number of two year fixed rate deals (592) available. In comparison, five years ago, the number of two year fixed rate deals available outnumbered five year deals by 148 and, even just a year ago, there were 17 more two year products than five year deals to choose from.

Commenting on this data, Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is clear from our analysis that over the past five years, the availability of five year fixed rate mortgages has grown at a quicker pace than the two year fixed rate availability for lower LTV products. Intense competition among mortgage providers seems to have resulted in the two year fixed rate market becoming saturated, margins becoming squeezed and mortgage providers looking to entice borrowers to consider a longer five year fixed rate deal as an alternative.

“Healthy competition within the five year fixed mortgage rate market is good news for borrowers, as an increase in the number of available products will generally push rates down and introduce longer-term options that borrowers may have not previously considered.

“Five years ago, the average two year fixed rate mortgage at 60% LTV was 2.17% and the average five year fixed rate at 60% LTV was 3.10%, meaning that a borrower would have needed to pay a premium of 0.93% when considering an alternative five year deal. This average premium has now reduced to just 0.26%, with the average two year fixed rate at 60% LTV falling to 1.81% and the five year average falling to 2.07%.

“Historically, borrowers seemed to have preferred the short-term commitment of a two year fixed rate deal, but now that product availability has significantly increased in the longer-term five year mortgage market, borrowers may be looking beyond interest rates and more towards the stability of setting monthly mortgage repayments and hedging themselves against uncertain economic conditions in the longer term.

“As with any mortgage, it is important that borrowers weigh up the overall true cost of any deal and make sure that a longer-term deal is suitable for their specific needs.”

Virgin Money has launched a range of fixed rate residential and buy-to-let mortgage deals that are available at the same interest rate for a two or three-year initial term.

The mortgage sector has seen a slow start to 2020 with little activity at the top of the charts. Saying this, after a highly competitive mortgage sector last year, there are still extremely competitive rates for borrowers wanting to take out a mortgage or who are looking to remortgage.

When looking for the best mortgage, borrowers should keep in mind that the lowest rate available might not be the best mortgage deal for their needs. Instead, borrowers should consider a range of factors such as product fees, incentives and flexible features, when choosing a mortgage deal.