Mortgage product choice rises as rates fall

Those planning to take out a mortgage now have more deals to choose from, but future financial events could affect the market.

After falling for two consecutive months, the number of mortgage deals on the market rose to 6,645 in October, according to the latest Moneyfacts UK Mortgage Trends Treasury Report.

While this is slightly lower than July 2024, when there were 6,658 products available, there are now almost three times as many mortgage deals to choose from than in October 2022 when there were just 2,258 products on offer.

This increase in mortgage product choice comes as average fixed mortgage rates continued to fall between September and October.

“These moves show the promising attitude of lenders to draw in new customers, which may be even more pressing as we edge closer to any of their end of year targets,” commented Rachel Springall, Finance Expert at Moneyfacts.

“Last month falling swap rates encouraged lenders to cut rates, but a combination of the looming Budget, concerns over inflation and other global influences can result in market pricing uncertainty,” she added.

Falling fixed rates

The average two-year fixed mortgage rate dropped from 5.56% at the start of September to 5.40% at the start of October, while the average five-year fixed rate fell from 5.20% to 5.07%.

This is the lowest these rates have been since May 2023.

Mortgages with a maximum loan-to-value (LTV) of 60% saw particularly noticeable rate reductions, as the average two-year fixed rate dropped 0.18 percentage points month-on-month to stand at 4.84% in October. Meanwhile, the average five-year fixed rate fell from 4.70% to 4.57%.

In further encouraging news for borrowers with a large deposit or amount of equity in their home, the number of deals available at the 60% LTV tier increased to 775, the highest level on Moneyfacts’ records.

What’s next for the mortgage market?

Even though the average shelf-life of a mortgage product remained consistent at 21 days, indicating some stability in the mortgage market, prospective borrowers shouldn’t delay if they see a suitable deal.

While mortgage rates are still expected to continue their downwards trend, the Autumn Budget on 30 October and the next Bank of England base rate decision on 7 November could prompt some changes.

And providers may already be starting to anticipate some of these changes as several lenders, including Coventry BS, increased the rates on some of their fixed deals in recent days. Halifax and Lloyds Bank also withdrew some of their variable-rate and tracker mortgage deals this week.

“Lenders will no doubt be watching the markets closely, so they may react to changes suddenly,” explained Springall.

“As a result, as we have seen in the past, some deals could be pulled as lenders try to assess their current margins,” she continued.

Choosing the right mortgage for your situation can be complicated, so it may be worth seeking professional advice to help you work out your options.

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