Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 07/10/2019

Moneyfacts UK Mortgage Trends Treasury Report, not yet published, reveals that the average two-year fixed rate at maximum 95% loan-to-value (LTV) has increased by 0.05% from 3.23% to 3.28% since last month and has returned to the same level that was recorded six months ago. However, the average two-year fixed at 90% LTV has increased by only 0.01% to 2.65% since last month, but is 0.02% higher than the average rate that was recorded six months ago. Despite this, the difference between the two rates this month stands at a significant 0.63%.

In contrast, the average two-year fixed rate at maximum 60% LTV has decreased by 0.04% from 1.84% to 1.80% since last month and has reduced by 0.11% since April this year.

One hundred and seven out of 129 two-year products at maximum 95% LTV are available to first-time buyers, with 98 of these products available up to a maximum mortgage term of either 35 or 40 years and 94 products available up to a maximum age of 75 years of age and above at the end of the mortgage term.

Residential mortgage product analysis

Average two-year fixed rate – by LTV

Max LTV

60%

75%

80%

85%

90%

95%

Apr-19

1.91%

2.34%

2.45%

2.47%

2.63%

3.28%

Sep-19

1.84%

2.34%

2.42%

2.46%

2.64%

3.23%

Oct-19

1.80%

2.32%

2.39%

2.45%

2.65%

3.28%

Difference

-0.04%

-0.02%

-0.03%

-0.01%

0.01%

0.05%

Source: Moneyfacts UK Mortgage Trends Treasury Report

Darren Cook, Finance Expert at Moneyfacts, said:

“It appears that mortgage providers may be factoring in a larger proportion of default risk into rates at higher LTVs, where, among other things, competition and lower wholesale funding costs seem to be benefiting borrowers who have a greater equity stake in their property and are sharing much more of the risk with the lender at lower LTV bands.

“The difference in average rates between 90% and 95% LTVs has historically always been greater than differences in average rates between LTVs lower down the tier scale, so it is always worthwhile for a potential first-time buyer to try to raise an additional deposit and attempt to step down the ladder to find a mortgage at lower interest rates. With rates at the 95% LTV rising faster than at any other tier at the moment, it is likely the gap between these two higher LTV tiers, which currently stands at 0.63%, could widen in the coming months.

“Higher LTV fixed mortgage rates may be creeping up, but the affordability of these products may be helped by the fact that of the 107 two-year fixed rate products at maximum 95% LTV available to first-time buyers, 98 are available up to a maximum mortgage term of either 35 or 40 years and 94 products are available up to a maximum age of 75 years of age or above at the end of the mortgage term. This enables borrowers to lower their monthly repayments by spreading the cost, which as a result makes them more affordable – helping to pass stringent affordability tests when applying for a mortgage.”

Find out more about getting on the housing ladder.

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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