As mortgage rates had already started to rise before the base rate increase was announced last November, you might think they’d still be climbing now, especially given ongoing speculation about further base rate rises.
However, the latest Moneyfacts UK Mortgage Trends Treasury Report reveals that there hasn’t been that much movement in the market, with higher loan-to-value (LTV) brackets even seeing a fall this month.
Overall, the average two-year fixed rate is unchanged for a third consecutive month, sitting at 2.35%, and the average rates at 80% and 85% loan-to-value are also that same as last month. Yet the average at 95% LTV (so for those with just a 5% deposit) fell by 0.05% this month to 4.07%, while the rate at 90% LTV fell by 0.03% to 2.63%.
There was even a small increase in the number of products that are available, with one more product at 90% LTV and seven more at 95% LTV. Overall, the product count rose by 65 this month to 4,570, following a drop of availability in January. The report suggests that this is due to “a measure of competition” returning to this sector of the market.
The report goes on to say that providers “don’t want to raise rates too much or too quickly for fear of impacting affordability,” which explains why rates at higher LTVs aren’t following base rate too diligently. If there are any more base rate rises, however, providers may be forced to follow suit, which is why those with a 5% or 10% deposit would do well to commit to a mortgage sooner rather than later.
As the averages show, a mortgage at 90% LTV, which can be found in the regular fixed rate mortgage charts, tends to have a lower rate than one at 95% LTV, which can be found in the first-time buyer chart. So, those saving up to buy their first home may want to keep saving a little while longer, potentially with assistance from a Help to Buy ISA, so they can afford a better mortgage deal.
Homeowners coming to the end of their current two-year fixed rate mortgage deal may also want to look around, as additional figures from the report show that the average standard variable rate has risen to a new post-crisis high. As a result, those who are coming to the end of a two-year term and reverting to their lender’s standard rate could be facing a whopping rate rise of 2.21%