Fixed mortgage rates have hit the lowest levels seen in six months, new data shows.
According to Moneyfactscompare.co.uk, the overall average two and five-year fixed rates dropped between the start of November and the start of December, reaching 6.04 percent and 5.65 percent, respectively. These rates represent the lowest recorded since June 2023.
The average two-year fixed rate stands 0.39 percent higher than the average five-year equivalent, a narrower gap than the 0.43 percent difference last month.
Meanwhile, the average ‘revert to’ rate or Standard Variable Rate (SVR) remained unchanged. At 8.19 percent, this rate is at the highest level on Moneyfacts’ electronic records, which started in July 2007.
Rachel Springall, finance expert at Moneyfactscompare, said: “Fixed mortgage rates have continued to drop across all loan-to-values (LTVs), month-on-month, on two and five-year fixed terms.
“These falls will come as good news to borrowers across the spectrum, including first-time buyers. Those borrowers with small deposits will find that average rates are now down considerably from just a few months ago.”
The current average two-year fixed rates at 90 percent and 95 percent Loan-to-Value (LTV) stand at 6.01 percent and 6.34 percent, respectively. This marks a decrease from the rates in August 2023, which reached their highest point for the year at 6.81 percent and 7.1 percent.
Ms Springall continued: “This could improve the potential mortgage affordability of would-be buyers or those looking to remortgage with limited equity.”
Product choice increased for the fifth consecutive month, reaching a total of 5,694 options. This marks the highest level of availability in over 15 years. According to Moneyfacts, the last time there were more deals available was in March 2008, with a total of 6,192 products.
Ms Springall said: “Mortgages in the 90 percent LTV sector are in abundance, now with over 700 deals for borrowers to choose from, it is the highest count seen on our records in over a year (February 2022 – 735).
“This is promising as just one year ago there were less than 500 deals (December 2022 – 457). Those borrowers who can only stretch their deposit to five percent will find over 250 deals to choose from, compared to just 144 deals a year ago.
“It would be encouraging to see more appetite from lenders within the 95 percent LTV sector moving into 2024, particularly as the Mortgage Guarantee Scheme has been extended to the end of June 2025.”
Ms Springall also said the incentive to refinance may be in the mindset for many borrowers as the new year approaches, but may be an “even more pressing” situation for those sitting on a standard variable rate (SVR).
She explained: “Those coming off a two-year fixed will find the average rate is 3.7 percent higher on average (December 2021 versus December 2023) and that the average SVR is above eight percent.
“Borrowers may then not be willing to wait for fixed rates to fall further and wish to lock into a fixed rate now for peace of mind.
“Lenders will no doubt be working hard to meet their end-of-year targets right now, indeed the average shelf life of a mortgage has fallen to 17 days, down from 20 days, so hopefully such vigorous repricing will result in better deals for borrowers desperate to refinance.”
