Mortgage borrowers on their lender’s standard variable rate (SVR) could save 2.5% simply by switching to a two year fixed rate deal. Meanwhile, the average rates on both two and five year fixed deals at 60% and 80% loan-to-value (LTV) have fallen since the start of the year, research by Moneyfacts.co.uk has found.
Since January, the total number of mortgage deals across all LTVs fell by 2,221. Although the number of mortgage deals has fallen significantly during 2020 so far, resulting in less competition overall in the market, the average SVR has also fallen and is now 0.42% lower than at the start of the year. Despite the significant fall in SVR, those currently on their lender’s SVR should consider switching to a new deal as the current average two year fixed rate, which stands at 1.98%, is now 2.5% less than the average SVR.
“Following the Bank of England’s decisions to cut the base rate twice in March, and this remaining at an unprecedented low of 0.10%, average rates have fallen,” explains Eleanor Williams, finance expert at Moneyfacts.co.uk. “Since the start of March 2020 through to today, the average SVR has reduced by 0.42%. Over this same time period, the average two year fixed rate has dropped by 0.45% and the average five year fixed deal has seen a cut of 0.51%. The difference between the average SVR and the average two year fixed deal is now 2.50%, so those who have delayed switching may wish to move promptly now, as significant savings could be made while rates remain at record lows.”
|Overview of 2020 residential mortgage market|
|Total product count (all LTVs, fixed and variable rate products||4,969||5,076||5,222||3,192||2,566||2,810||2,748|
|Average Standard Variable Rate (SVR)||4.90%||4.90%||4.90%||4.75%||4.55%||4.49%||4.48%|
|Average rate two-year fixed - all LTVs||2.44%||2.42%||2.43%||2.36%||2.09%||2.02%||1.98%|
|Average rate five-year fixed - all LTVs||2.74%||2.73%||2.74%||2.66%||2.35%||2.26%||2.23%|
Although there has been a slight fall in the number of deals being offered 60% LTV and 80% LTV, down by 42 and 97 respectively since the start of the year, those looking to remortgage at these LTVs will have found that the average rates are now lower than in January. The average five year fixed rate at 80% LTV has seen the biggest fall and is now 0.37% less than in January. Those looking to fix into a five year deal will find that the average rate at 60% LTV is now 1.98%, 0.09% lower than at the start of the year. Meanwhile, those looking at two year fixed deals will find that they can now get an average rate at 60% LTV of 1.69%, which is 0.12% lower than the average rate in January. The average five year fixed rate at 80% is 0.3% less than at the start of the year, standing at 2.13%.
Not only is it now cheaper to lock into a two or five year fixed deal at 60% and 80% LTV, but many lenders are also offering automated valuations and enabling remortgages to be carried out online, making it even easier for borrowers to lock into a new mortgage deal.
|60% and 80% LTV residential mortgage market|
|Total product count (60% LTV)||585||611||604||520||522||545||543|
|Total product count (80% LTV)||668||694||714||482||430||550||571|
|Average rate two-year fixed (60% LTV)||1.81%||1.79%||1.8%||1.82%||1.79%||1.73%||1.69%|
|Average rate two-year fixed (80% LTV)||2.43%||2.39%||2.41%||2.41%||2.26%||2.14%||2.13%|
|Average rate five-year fixed (60% LTV)||2.07%||2.11%||2.12%||2.1%||2.08%||2.02%||1.98%|
|Average rate five-year fixed (80% LTV)||2.74%||2.69%||2.71%||2.67%||2.49%||2.37%||2.37%|
While 2020 has seen average rates at 60% and 80% LTV fall, first-time buyers and those looking to remortgage at a high LTV will have not only seen their rates increase since January but the number of products available fall significantly. In fact, the only high LTV that has not seen average rates increase since January is five year fixed mortgages at a 95% LTV, which has seen rates fall by 0.10% – saying this, there are only a total of 14 deals at 95% LTV available on the market today. Those looking for a 90% LTV will have seen the biggest fall in total number of deals available, decreasing from 751 in January to just 72 deals available in June. “The recent product count fluctuations have been mainly focused around the higher-risk, higher LTV tiers, which can be explained by a number of possible factors,” said Williams.
“There has been an overwhelming level of demand from borrowers seeking products in these sectors, leading to some lenders who had relaunched offerings needing to pull them back to ensure their workload could be managed. The potential for negative equity issues, should house prices slump, is now also a spectre. This will be especially disappointing to first-time buyers where there are a limited number of products available to those with a smaller deposit at a time where savings rates have fallen to new lows.”
|90% and 95% LTV residential mortgage market|
|Total product count (90% LTV)||751||776||779||326||100||183||72|
|Total product count (95% LTV)||386||405||391||162||41||31||14|
|Average rate two-year fixed (90% LTV)||2.59%||2.58%||2.57%||2.84%||2.4%||2.3%||2.68%|
|Average rate two-year fixed (95% LTV)||3.25%||3.22%||3.26%||3.47%||3.36%||3.28%||3.94%|
|Average rate five-year fixed (90% LTV)||2.92%||2.91%||2.91%||3.24%||2.65%||2.57%||3.01%|
|Average rate five-year fixed (95% LTV)||3.56%||3.52%||3.58%||3.9%||3.62%||3.48%||3.46%|
With so many deals being withdrawn from the first-time buyer and high LTV market, competition is fierce to secure mortgages at the most competitive rates. In order to secure the best rates, first-time buyers may need to consider a deal that requires a guarantor mortgage. These mortgages usually require a parent or another close relative to take on some of the risk of the mortgage by acting as a guarantor if the borrower cannot meet repayments.
For those looking to buy their first home or who want to remortgage at a high LTV, speaking to a mortgage broker will be able to provide advice on the best type of mortgage deal for their circumstances and may help them to secure the best rates available.
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