The latest Moneyfacts UK Mortgage Trends Treasury Report, due out tomorrow, reveals that the average two-year fixed mortgage rate has dropped by 0.04% month-on-month, the first time it has fallen on a monthly basis in 12 months. Given the recent upward trend, this is a pleasant surprise for mortgage borrowers.
"November 2017 marked the starting point of the upward trend in the average two-year fixed rate, with subsequent figures either rising or stagnating," Charlotte Nelson, finance expert at Moneyfacts, said. "This month marks not only a break away from this upward trend, but the first time the Moneyfacts UK Mortgage Trends Treasury Report has recorded a reduction to the average mortgage rate since the November 2017 base rate rise."
With another base rate rise not far behind us, many would have expected rates to continue moving upwards, but instead averages appear to have largely bucked the trend, with the five-year fixed mortgage average down by 0.01% and even tracker rates seeing a welcome decrease. The average two-year fixed rate particularly stands out, as it's seen the largest fall month-on-month.
|Average two-year fixed rate||2.33%||2.53%||2.49%|
Charlotte explained that this welcome movement is due to providers "reigniting competition in the market to attract remortgage customers and retain their mortgage books". This may also be why providers are happy to see their standard variable rates (SVRs) go up, as Charlotte found that "the average SVR increased for a second month running (reaching 4.89% in October)," giving borrowers even more reason to remortgage.
Whatever providers are doing, it seems to be working, as due to rate changes and the Bank of England's base rate decision remortgage approvals were up by 9.2% year-on-year, according to UK Finance's latest Household Finance Update. "It is these additional remortgage customers that providers are vying to attract," Charlotte said.
"This is not only seen by the decrease in average rate, but also the increasing number of lower loan-to-value (LTV) products. Previously, the number of deals had stagnated for those with lower LTVs, with competition reserved for more niche areas. However, as competition between providers has intensified, the number of deals in this area has increased."
Economic factors such as the two-year SWAP rate, which increased by 0.05% this month, will be putting pressure on lenders to up their rates, but at the moment customers can still take advantage of providers' competitive streak. Indeed, Charlotte concluded: "Borrowers know only too well that low rates won't be around forever, so anyone on an SVR or approaching the end of their deal would be wise to shop around and take advantage of the current competition in the market."
Have a look at the fixed rate mortgage charts to see if you can find a great deal, while they're still around. Even borrowers looking for a variable or tracker rate mortgage could still be able to benefit from remortgaging despite August's base rate rise.
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