Derin Clark

Derin Clark

Online Reporter
Published: 28/08/2019

The average five year fixed mortgage rate has fallen from 2.84% to 2.79% in the last month, while the average two year fixed mortgage rate has dropped from 2.48% to 2.46% during the same period, recent data from Moneyfacts.co.uk shows.

Five year mortgage rates see biggest fall

The fall in mortgage rates is good news for borrowers, especially at this time of economic uncertainty when many households are concerned about their finances. With the five year fixed mortgage rate showing the biggest fall, it is particularly good news for borrowers looking for long-term security by fixing their mortgage rate into a five year deal.

The data shows that the largest rate reduction has been recorded in the five year maximum 80% loan-to-value (LTV) tier, which has fallen by 0.09% to 2.78%, followed by the five year maximum 70% and 85% LTV tiers, which have both decreased by 0.07% to 2.99% and 2.80% respectively. In fact, the only LTV tier to see a rate increase is the two year fixed at a maximum 65% LTV, which has increased by 0.01% to 2.03% from this time last month.

Two year fixed average mortgage rates 

Maximum LTV 60% 65% 70% 75% 80% 85% 90% 95% Overall average
27 Jul 19 1.86% 2.02% 2.58% 2.36% 2.47% 2.49% 2.64% 3.24% 2.4846%
27 Aug 19
1.85% 2.03% 2.55% 2.34% 2.44% 2.45% 2.64% 3.23% 2.4632%
Change since last month -0.01% 0.01% -0.03% -0.02% -0.03% -0.04% 0.00% -0.01% -0.0214%

Five year fixed average mortgage rates

Maximum LTV 60% 65% 70% 75% 80% 85% 90% 95% Overall average
27 Jul 19 2.23% 2.37% 3.06% 2.68% 2.87% 2.87% 3.00% 3.64% 2.8426%
27 Aug 19 2.18% 2.36% 2.99% 2.64% 2.78% 2.80% 2.96% 3.63% 2.7861%
Change since last month -0.05% -0.01% -0.07% -0.04% -0.09% -0.07% -0.04% -0.01% -0.0565%

Darren Cook, finance expert at Moneyfacts.co.uk, said: “After a couple of months of marginal rate movement, it seems that rate competition has returned to the fixed mortgage rate market and that lenders have been focusing on the five year fixed rate sector in particular. Those providers making significant cuts to five year fixed products include Barclays Mortgage by up to 0.07%, Coventry Building Society by up to 0.10% and Santander with large cuts of up to 0.24%.

“It appears that the recent fixed mortgage rate cuts and the resurgence of rate competition has been driven by a fall in interest rate SWAPs, a market that lenders generally use to hedge themselves against future interest rate fluctuations. The significant fall in SWAP rates indicates that markets may have already factored in a base rate cut in the short term.

“Since the beginning of this year, our analysis shows that the strongest rate competition appeared to take place at the maximum 95% LTV market, with lenders attempting to attract potential first-time buyers, which are considered the lifeblood of the mortgage and property market. As a result, the two year average fixed rate at this tier was driven down from 3.46% on 1 January to 3.24% by 16 May, where this rate has relatively remained unchanged since.

“Mortgage lenders may now feel that higher LTV tiers – often considered riskier – may have been cut enough and some larger mortgage lenders are focusing on decreasing rates at the lower-end tiers, with the view of retaining existing mortgage business rather than seeing this business drift away as the overall two year fixed mortgage rate is currently at a 52-week low of 2.46%.”

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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