‘Great news for borrowers’ as mortgage choice improves and rates tumble

With the Stamp Duty Land Tax (SDLT) holiday beginning to taper towards its end, many will be interested to get a steer on the level of mortgage product choice out there, as well as the rates being offered. And, according to the latest Moneyfacts UK Mortgage Trends Treasury Report data, there’s good news for borrowers, and prospective homeowners.

This is an increase of 269 in the last month alone, and the highest it has been since March 2020, when levels stood at 5,222.

Furthermore, Moneyfacts said it is the first time since June 2018 that they have recorded availability increasing across all the individual loan-to-value (LTV) tiers.

But, it’s borrowers seeking higher LTV products who have seen the largest improvements in choice.

In particular, 95 percent LTV borrowers have seen a jump of 61 products compared to June 2021.

In terms of rates, there’s further good news.

For only the second time in the past 12 months, both the average overall two-year and five-year fixed rates fell over the course of the month to 2.55 percent and 2.78 percent respectively, Moneyfacts found.

In both cases, the reduction was by 0.04 percent, marking the largest monthly reductions recorded for either rate since June 2020.

However, they are some considerable way above their equivalent rates year-on-year, as in July 2020, the money comparison website logged record lows of 1.99 percent and 2.25 percent for these rates.

Eleanor Williams, Finance Expert at Moneyfacts, said: “The level of choice available to those looking for a residential mortgage has risen substantially again between June and July, as volumes rose by 269 new products bringing the total available to over 4,500.

“Over the past six months alone availability has recovered by 1,619 – or 56 percent – and for the first time in over three years, we tracked improvements in choice across all the LTV brackets this month, great news for borrowers with all levels of equity or deposit.

“Our data shows there is further cause for positivity as both the overall average two- and five-year fixed rates have fallen.

“At 2.55 percent the average two-year fixed rate is at its lowest since February (2.53 percent), while the average five-year rate at 2.78 percent is the lowest since April (2.77 percent).

“Although the two-year overall rate is 0.06 percent above its equivalent rate from a pre-pandemic July 2019, the five-year overall average rate is 0.07 percent below its equivalent two years on (2.85 percent) and could indicate lenders are moving to price longer-term fixed rates more competitively, perhaps reflecting a shift in borrower focus to locking in for stability in these uncertain times.”

So, is there anyone in particular who has benefitted from the reductions in mortgage rates?

“First-time buyers and those considering a mortgage at higher LTVs are amongst those to benefit the most from rate cuts, with the average two- and five-year fixed rates at 90 percent LTV falling by 0.15 percent and 0.08 percent respectively, while at 95 percent LTV reducing by 0.09 percent and 0.06 percent, respectively, but equally it is impossible to ignore the growing ranks of providers offering sub-one percent deals to tempt borrowers with larger levels of equity or deposit as well,” Ms Williams said.

“According to the latest Halifax House Price Index, there was a 0.5 percent drop in property prices, likely linked to the stamp duty holiday tapering off, but this in no way detracts from the fact that overall prices are up approximately 8.8 percent on a yearly basis.

“Demand for the very limited supply of property could remain high, as the appetite to either get onto the property ladder or for larger properties with home offices and outdoor space continues, and these borrowers could be enticed by the possible savings lower mortgage rates may bring them.”

However, amid the low mortgage rates, Ms Williams warned this may not stay this way forever.

She said: “Competition is evident across the residential mortgage sector, but there is no guarantee that rates will continue to fall, or for how long these record-low deals may be available for, therefore seeking advice to assess the best true cost deal for their own circumstances would be a wise move by any prospective borrower.”

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