Borrowers coming towards the ends of their fixed rates, as well as those looking to make their next purchase, should start exploring their options now as UK mortgage rates fall again. 

A level of optimism is slowly returning to the borrowing market, albeit on a cautious level as rates remain significantly higher than they were two years ago, as lenders continue to increase their level of competition. While many are cutting their rates, others are adding even more product choice to their shelves.

This is good news for existing homeowners and investors looking to remortgage soon, while those who may have been holding back on a new purchase or investment may now have a greater level of affordability and confidence in what they can borrow.

The latest figures released by Moneyfactscompare have revealed that the number of UK mortgage deals now available has returned to a level not seen since February 2022. Furthermore, products are staying on offer for a longer period of time, bringing greater stability to the market.

UK mortgage product availability is key

During times of economic uncertainty, lenders often reduce the number of products on offer while they reassess market conditions or wait to see what will happen with aspects such as inflation. In recent months, this meant that product choice in the UK mortgage market fell significantly.

For borrowers, this can make the landscape much more challenging, coupled with the fact that UK mortgage rates also climbed considerably during the same period. Now, with a much more optimistic economic and inflationary outlook, lenders are boosting product numbers and reducing rates.

As of the start of September, there were 5,338 UK mortgage products available, according to Moneyfacts, which is more than double the number seen in October last year. What’s more, deals in the 85% loan to value (LTV) bracket are now “at their highest levels on Moneyfacts’ records”.

Most UK mortgage deals are now on offer for 15 days before being withdrawn or changed. This is up from 12 back in July 2023.

Rachel Springall, finance expert at Moneyfacts, said: “Mortgage product choice has grown to its highest level since February 2022 and average rates are gradually falling. This positive momentum has resulted in the average shelf life of a mortgage product rising to 15 years, up from a record low of 12 days in July.”

She noted that the summer was a busy time for UK mortgage lenders, as they dropped fixed rates and brought in new deals to attract more borrowers.

Rates are falling once more

Later this month, the Bank of England is expected to make a further decision on whether to maintain the current base interest rate, or to raise or drop it. Lenders moving to reduce their rates now could indicate that many do not expect rates to increase, though.

Moneyfacts data shows that the average two-year fixed rate was 6.7%, down from 6.85% last month. Five-year fixed rates have also fallen from 6.37% in August to 6.19% in September, across all LTVs.

However, lenders’ standard variable rates and two-year tracker rates have actually increased during the same time, with the average SVR now sitting at 8.09% – a record high – and the average two-year tracker being set at 6.25%. Borrowers who do not select a new fixed rate when their deal ends may be automatically placed on an SVR.

Springall commented: “Those borrowers who are about to come off a fixed rate deal or are sitting on their revert rate may now wish to explore their options to refinance, particularly as the average SVR stands at a record high of 8.09%. As average fixed rates start to fall and the average SVR rises, the incentive to lock into a fixed rate deal increases.

“The average two-year fixed rate in September 2021 stood at 2.38% and, based on a £200,000 mortgage over 25 years, monthly mortgage payments at this rate would have been £885. The equivalent payment at today’s average SVR of 8.09% would be £1,556, a near £700 monthly increase.

“As average fixed rates remain at levels not seen since the years following the 2007 financial crisis, borrowers may wish to consider other options, such as tracker mortgages, so seeking advice to navigate deals is essential.”

Buy-to-let rates following suit

The buy-to-let market is also seeing rate falls across its UK mortgage deals, and an increase in the level of product choice available to investors.

For example, Foundation Home Loans is one of the latest specialist intermediary lenders to cut its buy-to-let core product range by up to 0.90% and bring back its two-year fixed rate products for its F1, F2 and standard HMO deals.

Skipton Building Society has also cut its fixed rates across some of its core products, including across its residential, landlord, new-build and government scheme ranges. It is also offering a new three-year loan fixed rate option.

TSB and First Direct are other lenders in the UK mortgage space that have reduced rates and introduced new products for buy-to-let landlords and other specialist buyers recently, including new three-year loans.

BuyAssociation specialises in helping investors secure their ideal property investment opportunity, and we can also put you in touch with a UK mortgage expert to assist you through the purchase. Get in touch for more information.