Number of mortgage deals increases

The number of mortgage products on offer has rocketed by more than a third since April.

The latest figures from Moneyfacts.co.uk report that there are now 1,624 mortgages deals on the market, up from 1,209 in April.

That is still a massive reduction on the 15,599 deals that were available at the peak of the market in July 2007, but is a further positive sign that competition is returning to the market, albeit slowly.

The greatest increase has been in the number of two-year fixed rate mortgage products. In April there were just 250 such deals to choose from, while today there are 405. The average interest rate charged on a two-year fixed rate has fallen from a peak of 5.21% in August to 4.93%.

There are now 352 three-year fixed rate deals available, a 22% increase since April, and 297 rates fixed for five years or more, compared to 259 in April. In contrast to two-year deals, the cost of three-year fixed rates has risen since the summer to stand at an average of 5.6%, while a five-year fix will cost 6.15% on average.

The number of mortgages on offer for borrowers with small deposits is still severely limited – there are nine deals available at 95% loan to value, up from just three in April. And there are 116 for those with a 10% deposit to choose from, up from 72 in April.

Michelle Slade, spokeswoman for Moneyfacts.co.uk, said:

"In such uncertain times, borrowers and lenders alike seem to prefer shorter term deals, where changes can be made relatively quickly if market conditions change dramatically. Increased competition in the two-year market has increased the competitiveness of the deals available, but at £928, the average arrangement fee remains more than £100 higher than on longer deals.

"Borrowers' love affair with shorter term deals means lenders benefit from the increased frequency with which arrangement fees become payable."