The average two and five-year fixed mortgage rates have fallen to their lowest in six months, 6.04% and 5.65% respectively.
According to the latest Moneyfacts figures, this is the fourth consecutive month of decreases and the margin between two and five-year fixed rates has narrowed from 0.43% last month to 0.39% this month.
The report continued that the average standard variable rate (SVR) remains the same at 8.19%, which is the highest since Moneyfacts’ electronic records began in 2007.
The average two-year tracker variable mortgage rose month-on-month and now stands at 6.16%.
Looking at product choice, the total number of products improved for the fifth consecutive month to 5,964 options, which Moneyfacts noted was the highest level for 15 years.
Moneyfacts shows that, compared to last year, the biggest recovery has been at higher loan to value (LTV) tiers with the product count at 90% LTV going up from 457 last year to 718 currently. At 95% LTV the annual increase has gone from 144 to 253.
The average shelf life of a mortgage is currently 17 days, which is slightly down from 20 the month prior but in line with the figure last year.
Moneyfacts said this was a sign that lenders were “vigorously repricing” as year-end approaches.
‘Fixed rates have continued to drop’
Rachel Springall, finance expert at Moneyfacts, said: “Fixed mortgage rates have continued to drop across all LTVs, month-on-month, on two and five-year fixed terms. These falls will come as good news to borrowers across the spectrum, including first-time buyers.
“Those borrowers with small deposits will find that average rates are now down considerably from just a few months ago, with the average two-year fixed rate at 90 and 95% LTV resting at 6.01% and 6.34% respectively, down from 6.81% and 7.10% in August 2023, which was the highest monthly point in 2023.”
She noted that this could “improve the potential mortgage affordability of would-be buyers or those looking to remortgage with limited equity”.
Springall noted that the recovery in product choice was “promising” especially at higher LTV tiers and given the impact of the mini Budget last year.
“It would be encouraging to see more appetite from lenders within the 95% LTV sector moving into 2024, particularly as the Mortgage Guarantee Scheme has been extended to the end of June 2025,” she added.
Springall said that the incentive to refinance would be at the front of many borrowers’ minds going into the new year, and for those on an SVR this would be a more “pressing situation”.
“Those coming off a two-year fixed will find the average rate is 3.70% higher on average (December 2021 versus December 2023) and that the average SVR is above 8%. Borrowers may then not be willing to wait for fixed rates to fall further and wish to lock into a fixed rate now for peace of mind.
“Lenders will no doubt be working hard to meet their end-of-year targets right now, indeed the average shelf life of a mortgage has fallen to 17 days, down from 20 days, so hopefully such vigorous repricing will result in better deals for borrowers desperate to refinance,” she explained.
