Economic pressures are being felt across much of the financial world, yet it appears that the mortgage market is defying those indicators, with our latest research revealing that average mortgage rates have fallen to the lowest point on Moneyfacts' records.
That's according to the latest Moneyfacts UK Mortgage Trends report, which shows that both the average two-year fixed and variable rates have hit fresh lows once again, now standing at 2.26% and 1.82% respectively. These figures mark a notable reduction over the last year, as the table below shows, highlighting the continued competitiveness of the market.
|July 2016||Jan 2017||July 2017|
|Average 2-Year Fixed Rate||2.55%||2.31%||2.26%|
|Average 2-Year Tracker Rate||2.01%||1.98%||1.82%|
|Source: Moneyfacts Treasury Report||Compiled 10/07/2017|
"While the average two-year fixed rate had stalled in recent months, it has fallen by 0.04% from June, so it appears that the trend of falling rates is now back on track," said Charlotte Nelson, finance expert at Moneyfacts. "The fall in both the fixed and variable sector comes at an interesting time; given mounting inflation and the Bank of England hinting at a base rate rise, falling rates are the last thing many would have expected, particularly given that the two-year SWAP rate has risen from 0.53% at the start of June to 0.68% in July.
"Recently, the savings market has also seen a boost. This, alongside rising SWAP rates, has historically resulted in mortgage rates rising, but these influences are currently having little effect on mortgage rates, which are still on a downward trajectory."
This can be largely explained by the intense competition among lenders looking to offer the best possible deals in the market, all of whom are eager to attract – and retain – customers. After all, many mortgage borrowers are on a Standard Variable Rate (SVR), and if the Bank of England decides to increase rates and SVRs follow, a substantial chunk of a lender's mortgage book could move to another provider almost overnight. This "may be the catalyst that is keeping rates low, as providers aim to lock customers into a deal with them," said Charlotte.
She concluded: "Though rates are still falling for now, borrowers will not necessarily need to see a base rate rise for rates to start to increase, as there will come a point where the only way to go from another record low is up. Borrowers sitting on their SVR or coming to the end of their deal may be wise to consider a low fixed rate now, before it's too late."
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