As we step into the bustling spring home-selling season, there’s a mixed bag of news for prospective homebuyers. Mortgage rates have seen a slight rise, yet there’s a silver lining with the availability of more product choices hitting record highs.
Rates on the Rise
Recent analysis from the financial watchdog Moneyfacts has shown a modest increase in the average mortgage rates as we transition from winter into spring. For those eyeing the market, the numbers speak volumes: the average two-year fixed mortgage rate has climbed to 5.80%, while the five-year fixed rate is now at 5.39%. This means the two-year rate is now 0.41% higher than its five-year counterpart, a noteworthy trend for those calculating their long-term borrowing costs.
A Sea of Choices
Despite the increase in rates, there’s a bright side for borrowers: an unprecedented increase in product availability. The total number of mortgage options available has surged to 6,307, marking the highest level since the frosty days of February 2008.
Loan-to-Value Ladder
Particularly interesting is the increased availability of deals in higher loan-to-value (LTV) tiers. For those less familiar, LTV is a measure used by lenders to determine the risk of lending money to buyers. A higher LTV means more risk for the lender, but also more opportunities for buyers with smaller deposits.
This spring, deals at the 90% LTV tier have grown for a second consecutive month, reaching 774 options – the highest in over four years. Meanwhile, the 95% LTV tier, crucial for those with limited savings, has also seen growth for a fourth consecutive month, with 335 deals now available, the most in nearly two years.
Stability in the Market
There’s more good news regarding the stability of mortgage products. The average “shelf-life” of a mortgage – how long it remains on offer before being withdrawn or replaced – has increased to 22 days from 15 at the beginning of March. This stability gives borrowers more time to make informed decisions without feeling rushed by the fear of missing out on a good deal.
Expert Insight
Rachel Springall, a finance expert at Moneyfacts, commented, “It is worth noting that both the average two- and five-year fixed rates are lower than they were back at the start of 2024. Borrowers will find rates are significantly lower compared to six months ago, when the average two- and five-year fixed rates were 0.67% and 0.58% higher respectively. The growth in choice is good news for first-time buyers, who may be struggling to find an affordable property. Those with limited deposits will find the cost to borrow at higher loan-to-values across the two- and five-year fixed rates rose month-on-month, with the average two-year fixed rates at 90% and 95% breaching 6%.”