Banks return to mortgage market as loan choice grows after mini-budget crash – and top deals have rates below 4%
- The number of products at the highest level since August, according to Moneyfacts
- Fixed mortgage rates continue to fall amid ‘rate war’ at just under 4%
The number of mortgage products on the market topped 4,000 for the first time since August last year, according to the latest data from Moneyfacts.
There are now a total of 4,341 options for mortgage borrowers, up from 3,643 in January. Late last year, lenders began pulling rates out of the market amid the interest rate chaos caused by the September mini-budget.
Good news for first-time buyers, the number of low deposit transactions has increased compared to a month ago. There are now 539 transactions for those with 10% deposits and 149 transactions on 5% deposits.
An increase in available mortgage products suggests the market is stabilizing after last year’s chaos
Last month there were 435 products for 10% deposits and 132 products for 5% deposits.
In addition, the average rates for two-year and five-year fixed contracts fell for the third month in a row.
The average rate on a two-year fixed contract is now 5.36%, with the five-year average being 5.08%, compared to 5.79% and 5.63% at the start of the year.
On a £200,000 25-year mortgage, the typical borrower fixing today would now spend £51 less per month on a two-year solution than someone fixing in early January, and £65 less per month on a five-year solution.
Earlier this month, Virgin Money released the first sub-4% deal since the 3.99% mini-budget chaos for a 10-year fix, widely seen as the start of a “war rates”.
The Yorkshire Buidling Society now has a five-year fixed deal at 3.98 per cent, and Halifax also slashed rates earlier this month across its entire product range.
Down: Mortgage rates soared in the fall of 2022 following the economic chaos after the mini-budget, but they are now falling
Although they remain above 4%, the two-year fixed contracts are approaching. The Yorkshire Building Society has a fixed two-year deal at 4.33% for those with deposits of 25% or more, while the Newcastle Building Society has a similar offer at 4.35%.
Rachel Springall, finance expert at Moneyfacts, said: ‘The rate competition seems more focused on five-year fixed deals, and the rate difference between that and the average two-year fixed rate of 0.24% is the largest margin observed in nearly 15 years.
“Borrowers at both ends of these lending-to-value tiers might now find lower rates and more choice, but it would be understandable if they waited a bit longer for rates to come down.
“The shelf life of mortgage transactions has also stabilized at 28 days compared to 15 days a month ago.”
What about tracker prices?
For those with standard variable or “return” rates from their lenders, the average is 6.84%, its highest point since October 2008 (7.01%), making fixed transactions much more attractive than they were.
The average two-year follow-up rate is now 4.39%.
Springall added: “Borrowers sitting on their rate of return may want to note that the average SVR is at its highest level since October 2008, so switching to a fixed deal may help them lower their monthly mortgage payments and their give peace of mind.
“If borrowers want a bit more flexibility to get out of their deal quickly, a follow-on mortgage might be a valid choice, but they should keep in mind that their rate could go up as well as down in the coming months.”
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