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Intense First Time Buyer Mortage Competition Sees Average Two-year Fixed Rate Fall

Housing-Market / Mortgages Feb 08, 2019 - 01:15 PM GMT

By: MoneyFacts

Housing-Market

Despite the Bank of England base rate rise of 0.25% to 0.75% in August 2018, Moneyfacts.co.uk research has shown that the overall average two-year fixed mortgage rate has actually fallen by 0.04% from 2.53% in August 2018 to 2.49% today.

Notably, 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 riskier higher LTV tiers.


Darren Cook, Finance Expert at Moneyfacts.co.uk, 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.

“Further research by Moneyfacts.co.uk has shown that building societies in particular appear to be focusing their efforts on the 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. However, the average rate for max 60% LTV offered by building societies is currently 1.95%, 0.09% higher than that of their counterparts and 0.08% higher than the overall average (1.87%).

“In addition to this, 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..

“Despite this increase in competition at higher risk LTV tiers, after the financial crisis the Financial Conduct Authority introduced clear affordability measures that mortgage providers must follow, so potential first-time buyers will still need to jump through several affordability hoops before they will find themselves on the first rung of the property ladder.”

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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