Lock into a new deal as rates start to creep up
Now is the time to secure a new fixed mortgage deal, according to Moneyfacts, noting that mortgage rates are slowly climbing from their record low levels.
Both the two and five-year fixed average rates for all loan-to-values (LTV) have increased by 0.09% since the beginning of July, now 2.08% and 2.34% respectively.
As might be expected, higher LTV tiers – which present a higher risk to lenders because the borrower has a more modest deposit – have experienced more significant rate rises.
Rates at 85% LTV experienced one of the sharpest climbs, with the average two-year fixed rate increasing by 0.21% this month, and the five-year equivalent climbing by 0.23%, sitting at 2.32% and 2.57% respectively as a result.
However, when the current averages are compared to their equivalent rates last year, the overall two-year fixed rate at 2.08% is 0.41% lower than it was in August of 2019 (2.49%). Five-year fixed rates are also 0.50% lower, at 2.34% this month compared to 2.84% a year ago, said Moneyfacts.
The financial information provider added that those exploring their mortgage options may want to secure a new deal now, before rates potentially increase further.
Fall in product choice
Moneyfacts also revealed further falls in product choice between July and August of this year, with 2,526 available products in the market on 1st August, a drop of 202 products compared to the start of July.
Eleanor Williams, finance expert at Moneyfacts, said: “The introduction of the stamp duty holiday and record low average rates following an enforced period of shutdown for the market has seen demand for mortgages escalate in recent weeks.
“However, product choice and availability remains a key issue for mortgage borrowers, with this month continuing the downward trajectory we saw between June and July.
“Our latest research illustrates that rates are starting to creep upwards, with the two and five-year fixed averages for all LTVs both increasing by 0.09% this month, and averages for higher LTVs in particular experiencing even more significant increases. Therefore, those who have been waiting to see how the market moves may want to consider pursuing a new deal now and lock into a low rate before they potentially climb further.”