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Good news for borrowers as average fixed mortgage rates drop to six-month low

Nick Cheek
Written By:
Nick Cheek

The average rates for two and five-year fixed mortgages have reached a six-month low after four months of consecutive declines.

The Moneyfacts UK Mortgage Trends Treasury Report found that the average rate for a two-year fix stood at 5% in March while the average five-year fix had a rate of 5.32%. 

Compared to February, this is down from an average two-year fixed rate of 5.44% and an average five-year fixed rate of 5.2%.  

Widening rate gap 

The last time the average rate for a two-year fix was this much higher than a five-year fix was in February 2008, when there was a 0.36% gap between the two options. 

The difference between a two and five-year fixed rate is wider at higher loan to value (LTV) lending tiers. For example, the average rate for a two-year fix at 95%LTV is 5.85%, compared to a five-year fix which is 5.33%, representing a 0.52% gap. 

At 60% LTV, the average two-year fix is priced at 5.01%, while a five-year fix is 0.25% lower at 4.76%. 

Standard variable rate on the rise

Meanwhile, the average standard variable rate (SVR) has steadily risen and is now 7.12%. It is the first time since October 2008 that the SVR has breached 7%, and the highest rate since April 2008 when it stood at 7.16%. 

Borrowers who took out a two-year fixed mortgage two years ago would now be facing the largest rate increases recorded by Moneyfacts. In March 2021, the average two-year fixed mortgage rate was 2.57% and the average SVR was 4.55%. 

Average two-year tracker rates have also increased and came to 4.84% in March, up from 4.39% in February. Rates are also higher than last year, when the average two-year tracker was priced at 2.03%. 

Product choice 

There are currently 4,372 mortgages on the market, 466 fewer products than at the same time last year. However, options have markedly recovered since October 2022 just after the mini Budget, when there were only 2,258 mortgages available. 

Numbers are also better than March 2021, when there were 3,532 mortgages on the market. 

Mortgage options are slightly up on last month too when there were 4,341 products available. 

High LTV mortgage choices have not recovered as quickly as low LTV counterparts, Moneyfacts data showed. 

There are 161 mortgages at 95% LTV compared to 342 this time last year. It is up from 149 last month but not massively improved from 132 in October, after the mini Budget. 

There are currently 546 options at 90% LTV, down from 678 last year. This is up slightly from 539 in February and better than the 295 products in October 2022. 

Meanwhile, there are 657 mortgages at 60% LTV up from 606 in February. This is higher than the 531 mortgages at the same tier in March 2022, and the 337 options in October. 

Positive momentum in the market

Rachel Springall, finance spokesperson at Moneyfacts, said: “The momentum in the residential mortgage market is positive, as fixed rates fell and product choice stabilised month on month. Lenders have continued to reduce fixed rates, with the average five-year fixed rate resting below the equivalent two-year.  

“Rate competition among lenders has been more focused on longer-term fixed mortgages. As the overall two and five-year fixed average rates drop to their lowest levels in six months, borrowers who put their plans to remortgage on hold towards the tail end of last year may now be looking at the latest offers.”