High end LTVs lead rate fall table

Michael Lloyd

September 23, 2019

Rates have fallen by the largest amount for 5-year fixed mortgages at 75% and 80% LTV in the past month according to Moneyfacts.

At 75% LTV on average, rates for 5-year fixes have dropped by 0.07% to reach 2.57% while 80% LTV rates have decreased by 0.08% to 2.70%.

Darren Cook, finance expert at Moneyfacts, said: “On 25 September 2017, the average 2-year fixed rate reached its record low of 2.17%, which is 0.27% below the current average rate of 2.44%.

“This gives an indication that borrowers who may be arriving at the end of their current two-year deal will probably have a high motivation to remortgage.

“Not only is the jump from the average 2-year fixed rate two years ago to the current average standard variable rate of 4.89% a significant increase of 2.72% – which would see interest payments more than double for those who remain on their current deal after the initial fixed rate period ends – but borrowers may need to look carefully to find a rate similar to the one they may have negotiated two years ago.”

The only LTV tier in both initial rate periods to see a rate increase was the maximum 95% LTV tiers.

The 2-year fixed 95% LTV rose by 0.03% to 3.26% and the 5-year average rate at 95% LTV increased by 0.01% to 3.64%.

Cook added: “It’s not just those coming to the end of a favourable fixed rate term that may have a high motivation to lock into a new deal, but those who are at the start of their journey.

“Borrowers looking to take their first step onto the property ladder may also feel a sense of urgency, with rates at the riskier LTV tiers of 90% and 95% LTV remaining static or increasing since the end of August.

“With the historic 2-year fixes coming to an end this month, this may perhaps explain further why lenders are focussing on the lower-LTV tiers when competing on margins.

“Not only do mortgage providers need to compete for new business, but they also need to keep an eye on retaining their existing borrowers, keeping in touch with competitors’ mortgage rates to ensure that current customers consider their existing borrower products as their first option to remortgage.”

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