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Mortgage product availability continues its recovery

by LLP Finance Reporter
7th Dec 20 11:46 am

Overall mortgage product availability has increased for the second consecutive month, however average two-year fixed rates are also continuing to climb, according to the latest data from Moneyfacts.

The number of available mortgage products now stands at 2,782, a jump of 378 since November. This is the largest monthly increase in product choice Moneyfacts has recorded since November 2014.

Further cause for positivity also comes for those looking for a mortgage in the higher loan to value (LTV) tiers. Moneyfacts has seen availability increase in both 85% and 90% LTV sectors, by 52 and 32 deals respectively over the last month. Both tiers now offer the highest number of available deals since March and June respectively.

For the fifth consecutive month, the average two-year fixed rate for all LTVs 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 five-year fixed rate for all LTVs reduced by 0.01% to 2.69% this month, and therefore remains 0.05% lower than the same rate last December.

At both 85% and 90% LTV, the average two-year fixed rates have increased on a monthly basis, by 0.05% and 0.03% to sit at 3.17% and 3.79% respectively. For these LTV sectors, average rates are now the highest recorded since January 2015 and February 2015 respectively.

Eleanor Williams, finance expert at Moneyfacts, said: “Echoing last month’s trend, the number of available mortgage deals has continued on an upwards trajectory, with a further 378 deals on offer now compared to November, the largest month-on-month increase in availability since November 2014. 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.

“It is especially positive to note that the additional products launched this month are not exclusively available in the lower LTV tiers. Despite a small fall in the products on offer at 95% LTV (where it remains the case that the deals available are specialist products), 22% of the new mortgages have been launched in the 85% and 90% LTV tiers. This positive movement at the 90% LTV in particular has been fuelled by a number of providers such as TSB, Yorkshire Building Society and Accord, among others, returning further deals to the market, which will no doubt come as great news to those with a smaller deposit/equity, who will have likely felt they had limited options open to them of late. This also indicates that lenders are continuing to assess their ranges to meet demand. Indeed, a number of the building societies launched deals for borrowers in their local areas, and Nationwide has indicated that it too will be increasing access to its 90% LTV products; moves that may hopefully encourage more lenders to follow suit in the coming weeks.

“However, as the number of products has increased, so too have some of the average fixed rates. The overall two-year average fixed rate for all LTVs makes its fifth consecutive monthly increase to 2.49%, now 0.05% higher than the same rate a year ago. It may be interesting to note that the two-year fixed rate at 90% LTV has only risen by 0.03% this month, despite the increase in the number of deals at this LTV fuelling this average, but when this rate is compared to the equivalent rate in December 2019, borrowers in this LTV bracket are now facing an average that is 1.17% higher than then. Lenders review their rates in light of many factors, and these increases may be a reflection of the fact that, while lenders are looking to cater to various borrower types with varying levels of equity or deposit, they also need to consider the still uncertain economic outlook in relation to new lending, and need to protect their existing mortgage customers as well.

“By contrast, those interested in longer-term stability for their mortgage may be pleased to see that the average five-year fixed rate for all LTVs reduced for the first time in five months, dropping by just 0.01% to 2.69%, and therefore remaining 0.05% lower than the same rate year-on-year. 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.

“Improvements in availability are likely to be well received, particularly by those borrowers with the smallest deposits who may have been concerned that with low savings rates and increasing house prices, their homeownership dreams would have had to be shelved. However, with no guarantee that rates will not continue to climb, those hoping to proceed with a mortgage soon would be well advised to secure the support and knowledge of a qualified independent adviser to enable them to search for the best product for their circumstances.”

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