Mortgage Rates Fall As Number Of Deals Rise | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 16/08/2021

Mortgage borrowers will be pleased to see that this month their choice in mortgage deals has risen, while at the same time, the average rates on two and five year mortgages have fallen.

Our research has found that between July and August, the number of mortgage deals has increased by 148, from 4,512 to 4,660. Meanwhile, the average rate on fixed rate mortgages has fallen, with two year fixed rate deals falling from 2.55% in July to 2.52% in August and the average five year fixed deal falling from 2.78% to 2.75% during the same period.

Although the last month has seen mortgage deals for those with a higher amount of equity in their home or deposits making headlines as mortgage lenders cut rates to record lows to attract these borrowers, the biggest fall in average rates has, in fact come at the other end of the market. For those with just a 5% deposit or equity in their home – which would be a 95% loan-to-value (LTV) mortgage deal – the average rate on a two year fixed deal has fallen by 0.10% month-on-month, down from 3.79% in July to 3.69% in August, while the average rate on five year deals has fallen by 0.08%, falling from 4.01% to 3.93%.

Commenting on the fall in average rates at a 95% LTV, Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “This reflects that, likely supported by the introduction of the Mortgage Guarantee Scheme, providers are prepared to cater to this traditionally higher-risk demographic, although their desire to do so remains some way behind where this was compared to a pre-pandemic August 2019 as there are currently 199 and 116 less deals to choose from than there were two years ago.”

Borrowers with a 40% deposit or equity in their home (60% LTV) will have seen a number of mortgage lenders slashing rates over the last month and there are now a number of deals at 60% LTV offering sub-1% rates. While these deals have been making headlines, the average rate at a 60% LTV has not fallen as much as those at a 95% LTV, with the average rate on a two year fixed deal falling by 0.03%, down from 1.58% to 1.55% and the average rate on a five year deal falling by 0.02%, falling from 1.81% to 1.79%.

Overall, the fall in average rates and rise in deals is good news for those looking for a mortgage, however Williams warns that those looking to lock into the best deal should act quickly as they are not lasting long in the charts. She said: “This month has seen the average shelf life for a mortgage product reduce by nine days to just 21 days, last seen in May 2017 and the joint lowest we have recorded. Borrowers considering their mortgage options may therefore find that products have a limited period when they are available, and so having the up-to-date market knowledge of a qualified adviser could be invaluable in ensuring they can secure their chosen product in time.”

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