Mortgage rates halve in ten years
The Bank of England cut interest rates to 0.5 per cent in March 2009 in a bid to stabilise the UK economy amid the global financial crisis.
The average two year fixed mortgage rate was 4.79 per cent ten years ago, almost double the rate available today at 2.49. The same is true of the average five-year fixed rate which has fallen from 5.62 percent to 2.69.
Moneyfacts said the figures showed there was healthy competition between providers to attract new borrowers.
The drop in interest rates coincided with greater product availability at most loan-to-value (LTV) tiers. The number of LTV products available at 95% has increased 130 times in the past decade to reach 391 today, which should help first time buyers.
At the lower LTV tiers too the number of mortgages available has almost doubled. Borrowers with 40 per cent deposit or equity have 588 products to choose from today compared to 272 in March 2009.
Providers have adapted
Moneyfacts spokesman Darren Cook said: “A decade ago, providers did not seem to want to lend to borrowers who could only raise a small deposit. However, providers have since adapted to the new post-crisis mortgage environment.
“One figure that has remained fairly static over the decade however is the average standard variable rate, having only increased by 0.12% since 2009, from 4.77% to 4.89%. Meanwhile, both the average two- and five-year fixed mortgage rates have nearly halved during this time.
“During the past ten years, not only have the two- and five-year fixed mortgage rates dropped, but the gap between the two has more than halved, falling from 0.83% in 2009 to stand at a difference of only 0.4% today.
“This could be a significant factor for borrowers when considering whether to fix for the short or longer-term, especially with the current economic uncertainty.”
At the same time, Cook pointed out that the Financial Conduct Authority introduced clear affordability measures that mortgage providers are required to follow, meaning lending criteria is much stricter than it was before the financial crisis.