UK mortgages: is now the best time to lock in competitive rates?


As the number of available UK mortgages continues to rise, lenders are enticing borrowers with low interest rates. This can benefit those looking to remortgage or buy a property.

The number of UK mortgages has increased for nine consecutive months. This has led mortgage choice to reach its highest level in 16 months, according to data from Moneyfacts.

At the beginning of July, 4,512 mortgage deals were available. This is an additional 269 on the month prior. The increased competition can be found across different loan-to-values (LTVs).

Eleanor Williams of Moneyfacts says: “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.”

Low interest rates

With the increased competition, lenders are fighting to win more customers. This has caused some interest rates to hit rock bottoms. Borrowers can even benefit from the lowest ever rate seen for a two-year fixed-rate mortgage of 0.94%. There are a number of sub-1% deals available for borrowers with larger levels of equity or deposit.

From June to July, average rates decreased by 0.04% for both two-year and five-year fixed deals. However, the average rate for a two-year fixed deal was 2.49% in July 2019. And now the average has increased by 0.06% to 2.55%.

Additionally, first-time buyers and borrowers considering a mortgage at higher LTVs are also benefiting from recent rate cuts. For 90% LTV mortgages, the average two- and five-year fixed rates fell by 0.15% and 0.08% respectively. At 95% LTV, rates also decreased by 0.09% and 0.06% respectively.

The finance expert at Moneyfacts states: “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.”

Locking in competitive deals

While the average two-year fixed-rate deal is 0.06% higher than the rate from July 2019, the average five-year fixed-rate is currently 0.07% lower than two years prior.

Moneyfacts points out that this could show lenders are moving to price longer-term fixe rates more competitively. And this may also reflect a shift in borrower focus to locking in stable rates for longer, especially after these uncertain times.

These competitive deals for UK mortgages could allow some homebuyers and property investors to lock in particularly attractive mortgage rates. This could in turn allow them to make significant savings.

Eleanor Williams comments: “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.”

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UK mortgages: is now the best time to lock in competitive rates?


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