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Mortgage rate war continues as two-year fixed rates fall

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The good news is that rates have fallen furthest for borrowers with a modest deposit
Mortgage rate war continues as two-year fixed rates fall

Intense competition for first-time buyers has led to a reduction in the average two-year fixed rate, despite a rise in the Bank of England Base Rate last August, said Moneyfacts.

The financial information provider said that, since the bank hiked interest rates, the average two-year fixed mortgage rate has actually fallen by 0.04% from 2.53% in August 2018 to 2.49% today.

Its even better news for borrowers with a modest deposit.

First-time buyer bonus

The average two-year fixed rate at the maximum 95% loan-to-value (LTV) tier has fallen by 0.54% over the same period, while at tiers such as 70% LTV the average rate has increased by 0.14%, indicating that providers may be focusing their attention at the higher LTV tiers, which are dominated by first-time buyers.

Darren Cook, finance expert at, said: “Following the Bank of England base rate increase last summer, we would typically expect to see mortgage rates rise, and this is true for borrowers looking to secure a mortgage with a 30% deposit, as the max 70% LTV average two-year fixed rate has increased from 2.35% to 2.49% over the past six months. Those with a slightly smaller deposit of 25% or 20% have also seen rates rise by 0.05% over the same period.

“However, those borrowers who can only manage to raise a 5% deposit have seen the max 95% LTV average fall from 3.95% to 3.41%, which is fantastic news for prospective first-time buyers looking to get their foot on the property ladder.

“There clearly seems to be a concerted drive by mortgage providers to try and secure the business of potential first-time buyers, who are the lifeblood of the mortgage and property markets and it is encouraging to see rates decrease as a result of some healthy competition.”

Mutual boost

Further research by Moneyfacts revealed that building societies are cheaper at higher LTV tiers: the average two-year fixed mortgage rate at max 95% LTV offered by building societies is currently 3.35%, 0.10% lower than the average offered by other mortgage providers and 0.06% lower than the overall average.

Cook added: “Building societies also account for a much greater proportion of the market at the higher LTV tiers than at the lower tiers, with 37% of all two-year fixed products at maximum 95% LTV available through building societies, compared with just 16% of all available products at the 60% LTV tier.”

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