In addition to this, figures show that fierce competition among lenders has lead to reductions in the overall average fixed rates month-on-month as providers continue to work to entice borrowers.
According to Moneyfacts research, this is the first time since June of 2018 that recorded availability has increased across all the individual loan-to-value (LTV) tiers. Borrowers seeking higher LTV products have seen the largest improvements in choice, particularly at 95% LTV, where we recorded a jump of 61 products compared to June 2021, and the current total of 253 available deals offers 239 products more than there were this time last year.
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% and 2.78% respectively. Reducing by 0.04% in both cases, these are the largest monthly reductions recorded for either rate since June 2020, perhaps reflecting some of the competition we are seeing in the market of late. They are however some considerable way above their equivalent rates year-on-year, as of July 2020 we logged record lows of 1.99% and 2.25% for these rates, due to the dearth of available deals fuelling these averages, particularly at the higher-rated, higher-risk top LTV brackets.
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% - 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% the average two-year fixed rate is at its lowest since February (2.53%), while the average five-year rate at 2.78% is the lowest since April (2.77%). Although the two-year overall rate is 0.06% above its equivalent rate from a pre-pandemic July 2019, the five-year overall average rate is 0.07% below its equivalent two years on (2.85%) 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.
“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% LTV falling by 0.15% and 0.08% respectively, while at 95% LTV reducing by 0.09% and 0.06%, respectively, but equally it is impossible to ignore the growing ranks of providers offering sub-1% deals to tempt borrowers with larger levels of equity or deposit as well.
“According to the latest Halifax House Price Index, there was a 0.5% 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% 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.
“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.”
