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Six-month review of the mortgage market

Six-month review of the mortgage market

Category: Mortgages

Updated: 25/07/2016
First Published: 25/07/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Following our recent look at the savings market over the last six months, we thought we'd take the opportunity to perform the same analysis on the mortgage market – and unlike the savings sector, it's all been positive for consumers.

Definite boost

It's clear that the mortgage market had a significant boost during the first half of 2016, and this led to some of the lowest rates on record. In fact, our latest research shows that, since the start of the year, average rates across all fixed mortgage terms have fallen, making it a great time for mortgage borrowers.

The table below highlights the trend in more detail; some sectors have seen particularly dramatic falls, with the average two-year fixed rate seeing the biggest reduction of 0.24% since January this year.

Apr-16 Today
Two-year fixed average rate 2.76% 2.55% 2.52%
Five-year fixed average rate 3.29 3.20% 3.10%
10-year fixed average rate 3.63% 3.50% 3.43%
Source: Compiled 25/07/2016

Competition reigns

Just why have rates fallen so dramatically? Well, much of it is due to competition in the sector, as Charlotte Nelson, finance expert at Moneyfacts, explains: "With competition still fierce in the market, it is little surprise that mortgage rates have fallen, reaching record lows yet again and currently showing no signs of stopping.

"Borrowers looking for a new mortgage deal will be substantially better off than they were six months ago. In fact, anyone considering a five-year fixed rate mortgage today would save themselves £240 a year compared with the equivalent deal in January."

However, it isn't only due to competition – recent economic events have certainly had an impact, too, with the recent plummeting of wholesale interest rates on the back of the referendum results having a definite effect.

Long-term popularity

Long-term fixed rates have particularly benefited from lower SWAP rates, and it isn't only the more acceptable five-year fixed rates that have fallen, either. Indeed, the 10-year fixed rate sector has seen a definite boon in the number of products available – the product count has increased from 80 in January to 127 today – with this boost in competition having a clear impact on rates, with the average 10-year rate falling by 0.20% over the same period.

And that's not all. Borrowers with smaller deposits haven't been left out, with the average two-year fixed rate at 95% loan-to-value (LTV) falling by 0.19% from January 2016 to 4.09% today, making it a great time for first-time buyers.

The only question now is how low rates can go – and for how much longer. As Charlotte points out, with the Help to Buy Mortgage Guarantee scheme ending in December this year, we simply don't know how long this current trend can be sustained, which is why it's important to make hay while the sun shines.

Charlotte concludes: "While the economy may have faced some uncertainty after the EU referendum, one thing is for certain: mortgage competition is currently here to stay, and borrowers sitting on their provider's Standard Variable Rate or coming to the end of their mortgage deal would be wise to consider a fixed rate deal now, when they are still at record lows."

What next?

Compare fixed rate mortgages to see if you can take advantage of the market

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.