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Borrowers have been enjoying a fantastic mortgage environment over the last few years, with average rates on a continued downward spiral and availability edging up. Well, we've just hit some new milestones, with figures from the latest Moneyfacts UK Mortgage Trends Treasury Report showing that the number of mortgages available has hit a nine-year high, while average rates have fallen to new lows across the board.
As the table below shows, the number of available products has increased by 849 in just one year to hit 4,460, making it the largest annual increase we've ever seen, while the monthly increase of 119 is equally as significant. It's also the highest total seen since March 2008 when 6,192 such products were available, just before the financial crisis took hold and caused availability to plummet.
|Total number of live products||6,192||3,611||4,162||4,341||4,460|
"The residential mortgage market has seen a significant increase in product numbers, resulting in the largest year-on-year increase since our records began," said Charlotte Nelson, finance expert at Moneyfacts. "Thanks to this boom in products, the number of deals available has leaped to its highest point since 2008, which is largely due to the amount of competition in the market."
As Charlotte explained, competition is the key driver behind the latest rise in availability, with lenders keen to protect their mortgage book against the possibility of losing borrowers when they reach the end of a fixed rate term. Providers could potentially lose a sizeable chunk of their book should borrowers decide to leave their standard variable rate (SVR), which means they have to "remain on top of their game to ensure they look attractive when borrowers start to consider remortgaging".
Our data backs up this assumption – a number of new providers have entered the lending sphere recently while others revamped their ranges, with many of these newer deals highly competitive as providers are actively attempting to leapfrog one another
in the mortgage Best Buys. Happily for borrowers, this competition is having a knock-on effect on average rates.
Indeed, all average mortgage rates fell to new lows this month, with each posting a reduction of 0.02% from April. This puts the average two-year fixed mortgage rate at a record low of 2.30%, while the five-year equivalent is now at 2.89%, and the two-year tracker rate has hit 1.91%, the lowest average mortgage rate ever recorded.
"Providers today do not only need to be price sensitive, but also offer borrowers a variety of features, to allow the customer to almost be able to tailor the mortgage to suit their needs," added Charlotte. "Given the multiple scenarios lenders now cater for, it is little wonder the market has seen product numbers shoot up."
However, it's worth pointing out that, while the market is now at its highest level in terms of availability since the financial crisis, the current mortgage market is fundamentally a different place compared to March 2008. For example, back in March 2008 the number of products at 60% loan-to-value (LTV) stood at just 24, whereas today that number is 549 – an increase of a staggering 525 products. Conversely, back in 2008 there were 575 deals available at 95% LTV, whereas today there are 257.
"When property prices were rising at an incredibly fast pace back in 2008, lending wasn't based on risk," explained Charlotte. "These figures show that we have moved to a more structured market, with the number of deals clearly sorted according to risk and borrowers now rewarded for having extra equity.
"Alongside this, the Mortgage Market Review has stabilised the market, making lending more robust, meaning providers can now focus on the life of the mortgage rather than the short-termism of the past.
"While the boost in product numbers can only be seen as a good thing, the more choice borrowers have, the more confusing it can be, so it is more important than ever that they seek advice to ensure they get the best deal for them."
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