Choice of mortgage deals increases, but rates rise too
Mortgage product availability has increased for the second consecutive month, according to Moneyfacts.
The financial information provider counted 2,782 mortgage products currently on offer, a jump of 378 since November – the largest monthly increase in six years.
There’s been a particular rise in mortgages available to a high percentage of the property’s value, known as high loan-to-value mortgages. At 85% and 90% loan-to-value, there’s been a rise of 52 and 32 deals respectively over the last month.
Eleanor Williams, finance expert at Moneyfacts, said: “At 2,782, this is still 44% fewer products than were on offer the same time last year, but it is still an improvement on the 53% year-on-year market contraction seen last month.
“This growth may be a reflection of lenders reacting to not only the level of pent-up demand from those looking to move following the first lockdown, but also the flood of would-be borrowers hoping to complete their new mortgage in time to benefit from the temporary stamp duty land tax holiday.”
But it’s not all good news.
For the fifth consecutive month, the average rate on a two-year fixed mortgage has increased.
Now at 2.49%, this is a rise of 0.06% compared to last month and represents a 0.05% year-on-year increase.
However, the average five-year fixed rate mortgage reduced by 0.01% to 2.69% this month, and therefore remains 0.05% lower than the same rate last December.
Williams added: “The difference between the overall average two-year fixed rate and average five-year fixed rate is now 0.20% this month, which is the smallest this gap has been since June 2013, when the two rates were just 0.17% apart.
“This may be positive news for those considering their options, as those opting for five-year fixed rates would not only benefit from longer stability in their monthly mortgage payments, but would also be protected for the term of their deal from any future interest rate rises.”