Competition among providers has resulted in significant reductions across higher loan-to-value (LTV) tiers month-on-month, according to the latest Moneyfacts UK Mortgage Trends Treasury Report.
The most dramatic month-on-month average rate cuts to LTV tiers were recorded at 90% and 95%, where the 2-year fixed rates dropped by 0.29% and 0.25% to 2.56% and 3.32% respectively.
Overall, the average 2- and 5-year fixed rates fell for a fourth consecutive month. The average 2-year rate fell by 0.13% to 2.25% while the 5-year equivalent dropped by 0.08% to 2.55%, both sitting at their lowest level since September 2020 (2.24% and 2.49% respectively).
Choice continues to improve in the residential sector as October marks the 12th consecutive month of increase in product numbers.
Rising by a further 127 this month to 4,939, although still slightly below the number on offer pre-pandemic (March 2020 – 5,222), there are now more than double the number of deals that were available this time last year.
Eleanor Williams, finance expert at Moneyfacts, said: “As living costs are on the increase, it is good news that mortgage rates have continued to reduce.
“At 2.25% and 2.55% respectively, the average overall 2- and 5-year fixed rates are the lowest they have been in 13 months, fuelled by falls in the average rates across the majority of the loan-to-value (LTV) tiers.
“Borrowers now have the chance to secure lower rates than were on offer a year ago when the sector was being rocked by the pandemic.
“In addition, those who took a now maturing 2-year deal in October 2019 and those who locked in to a 5-year initial term in October 2016, despite the turbulent past 18 months, may also be able to reduce their monthly mortgage payment outgoings, as the overall average rates are lower now than were on offer when they secured their current deals.
“Those with the smallest levels of deposit or equity will be pleased to note the most significant reductions are towards the top of the LTV tiers, and are even more dramatic than last month at both 90% and 95% LTV.
“In particular, the average rates within the 2-year fixed market for both these LTV brackets have fallen substantially month on-month (by 0.29% and 0.25%, to 2.56% and 3.32% respectively), both now the lowest at which they have been recorded during 2021.
“The gap between taking a 2- or 5-year fixed deal at these LTVs has widened month-on-month, however, first-time buyers may still prefer to lock into 5-year fixed rate deal, especially with murmurings of an interest rate rise on the horizon.
“Should base rate increase, those borrowers who are on a variable rate mortgage such as their lender’s standard variable rate (SVR) would be at risk of seeing their monthly repayments rise, therefore the benefit of fixing to a new deal and securing a stable rate and payment are clear for many, particularly as there is no guarantee that average rates will continue their downwards trajectory.
“Those considering a new mortgage may wish to secure the knowledge and advice of a qualified adviser, who can help with assessing their priorities and calculating the best route forwards for their circumstances.”