Boost for buyers as mortgage rates drop and choice rises

Mortgage borrowers now have the greatest choice of home loan products since February 2022, Moneyfacts data suggests.

It is a boost for buyers who have been hampered by high mortgage rates in recent months.

Moneyfacts data shows there are 5,338 mortgage products on the market as of early September, the highest count since February 2022 when there were 5,356.

It is also more than double the availability seen in October 2022. 

Within the individual loan-to-value (LTV) tiers, following month-on-month rises, options within the 85% LTV tier are at their highest levels on Moneyfacts’ records. 

This may well suggest more stability in choice across the market, Moneyfacts said.

Average rates are also falling despite expectations of a further interest rate rise from the Bank of England.

The average pricing on a two-year fixed rate mortgage dropped from 6.85% to 6.7% between August and September and fell from 6.37% to 6.19% on a five-year deal. The figures are still higher than the typical 2% average this time in 2021 and 4% in 2022.

Rachel Springall, finance expert at Moneyfacts, said: “It was a busy summer for lenders, as they moved to cut fixed rates and launch new deals to entice borrowers. 

“A notable area of growth in LTV spectrum was for borrowers who have a 15% deposit or level of equity, as choice in this sector rose by 74 deals, to stand at an all-time high on Moneyfacts’ records, standing at 868 products.

“As average fixed rates remain at levels not seen since the years following the 2007 financial crisis, borrowers may wish to consider other options, such as tracker mortgages, so seeking advice to navigate deals is essential.

“It will be interesting to see how the mortgage market improves in the weeks to come, particularly if SWAP rates fall, as lenders may then cut their fixed rate deals as a result. 

“As we have seen before, a volatile interest rate market can have a significant impact on lenders’ pricing strategies. Borrowers concerned about the affordability of their mortgage will be keen to see stability in product choice and for fixed rates to fall further before they refinance. 

“There are some attractive deals out there with incentive packages to choose from, which may be a more cost-effective choice than a low-rate fixed deal.”

It comes as Bank of England data showed the value of new mortgage commitments  - lending agreed to be advanced in the coming months – during the second quarter of 2023 was 26.2% greater than the first three months of the year but 26.6% less than a year earlier, at £61.7bn.

This was the first increase and highest value observed since the third quarter of 2022.

The figures showed that 54% of gross advances were for house purchases, a rise from both the previous quarter and year. Gross advances for remortgages constituted 32%, while borrowing for buy-to-let purposes fell to its lowest since the fourth quarter of 2010 at just 8.1%.

Gareth Lewis, managing director of property lender MT Finance, said: “It's a positive to see that new mortgage commitments picked up quarter-on-quarter suggesting borrowers may have paused at the start of the year to see how things would pan out but are now proceeding.

“While mortgage rates have increased from all-time lows, they are still at affordable levels although there has been some hesitancy to buy while there is uncertainty around where they might peak. As we've said for some time now, we need stability to allow consumers to gain confidence.

“Reassuringly, the evidence suggests that consumers are not over-stretching themselves, but remaining cautious and in some cases still waiting to see what happens. Once rates have plateaued, this will make decision-making easier and inspire more confidence.”