Mortgages rates see biggest cuts in 16 months | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 13/09/2021

Average mortgage rates for two- and five-year fixed deals have seen the greatest decline in a single month since May 2020. Data from Moneyfacts UK Mortgage Trends Treasury Report shows that for these average rates have now fallen for the third month in a row. The latest average rate for a two year fixed mortgage is 2.38%, a reduction of 0.14%, with a five year deal average of 2.63%, a 0.12% fall.

More choice for first-time buyers

Those looking for a mortgage at 90% and 95% loan-to-value (LTV) now have significantly more choice than this time last year. There are 283 95% LTV mortgages and 570 90% LTV mortgages. Both an increase from September 2020, but still shortly behind the numbers available in September 2019 at 380 and 774 respectively. These higher LTV deals also saw the greatest rate reductions, with the average rate for a two year fixed rate mortgage at 90% falling by 0.23% to 2.85% and five year averages falling by 0.18% to 3.23%.

More rates available at below 1%

The intensity of competition between mortgage lenders has not been see before and has led to historically low interest rates. Those buying a property or needing to remortgage with large deposits and a clean credit history can now benefit from rates below 1% for both two and five year fixed terms. There are 72 two year fixed and 29 five year fixed rate mortgages at below 1%.


Average rates at 60% LTV have also seen reductions, with the average two year fixed rate now 1.51% and a five year fixed deal at 1.71%. This is a fall of 0.33% and 0.47% respectively since September 2019.

Eleanor Williams, Finance Expert at Moneyfacts, said: 
“September marks the eleventh consecutive month of growth in total mortgage availability as the sector demonstrates resilience in the aftermath of an unprecedented 18-months. Rising by 152 this month, there are now 4,812 options for borrowers to consider. This is almost double the amount that was on offer this time last year (September 2020 – 2,412) and the highest this total has been since March 2020 (5,222) at the onset of the pandemic, as borrowers’ level of choice has improved across the LTV tiers (except for the limited 100% LTV bracket).
“Those with smaller levels of deposit may be pleased to see that at 90% and 95% loan-to-value (LTV) there are now 579 and 283 products on offer, compared to just 62 and 14 this time last year when lenders had withdrawn swathes of higher risk, high LTV products. Even though availability in these top lending brackets remains below pre-pandemic levels, this month the most significant rate drops were recorded at 90% LTV, where the average two- and five-year fixed rates fell by 0.23% and 0.18% respectively. The average two-year fixed rate at 90% LTV has breached 3% for the first time since July 2020 and is at its lowest since June 2020 when it hit 2.30%, indicating that lenders may be competing for business in this arena.
“Housing supply remains a key issue however, and whilst the Stamp Duty Land Tax (SDLT) holiday fuelled market movement, the level of demand has meant a continued rise in house prices. According to Halifax these rose to a record high in August, and while the pace of increase has slowed slightly, evidence of the ‘race for space’ remains. It is unknown whether borrowing levels will subdue in the months ahead, accounting for a seasonal slow-down and the fact that many consumers are returning to work or taking a much-needed break, but there seems to be no signs of lenders easing off the rate war. 
“Those looking to move will need to act quickly in their property search and those looking to remortgage could save a significant sum by taking advantage of a low-rate deal. Lenders are keen to take on new business and due to the market volatility, borrowers would be wise to seek independent advice to navigate the growing choice to ensure they find the most appropriate mortgage package for their circumstances.”
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