Mortgage rates halve since financial crisis

The latest research from Moneyfacts can reveal that, a decade on from the financial crisis, average mortgage rates have almost halved, with heightened competition encouraging more borrowers to get onto and move up the housing ladder.

That's according to the findings of the latest Moneyfacts UK Mortgage Trends Treasury Report, which has analysed the market since the Bank of England made the last of its six consecutive interest rate cuts to reach 0.50% in March 2009. The data shows that the average two-year fixed mortgage rate has fallen from 4.79% at that time to 2.49% today, with the average five-year mortgage rate seeing a similar reduction (down by 2.73%) and the average two-year tracker rate down by 1.78%. These are just averages, too, with the best rates available far lower.

Not only that, but intensifying competition to attract new borrowers has seen product availability soar, particularly in the first-time buyer (FTB) sector, with the number of mortgages available at 95% loan-to-value (LTV) increasing 130 times over to stand at 391 today. The table below highlights the changes in more detail:

Selection of Key Mortgage Indicators

Source: Moneyfacts Treasury Reports

"It would have been difficult to predict 10 years ago that we would ever see mortgage rates at historic lows and product numbers at record highs, with providers now vying to compete for new business across most LTV tiers," said Darren Cook, finance expert at Moneyfacts.

"In particular, a decade ago, providers did not seem to want to lend to borrowers who could only raise a small deposit of 5%, with only three products available to those with a 5% deposit in March 2009. However, providers have since adapted to the new post-crisis mortgage environment, and today, the same type of borrower has the choice of 391 different products."

It isn't just low-deposit borrowers who can benefit, either, as product numbers have also increased significantly at the lower LTV tier. Indeed, borrowers with a 40% deposit/equity now have double the number of mortgages to choose from than a decade ago, increasing from 272 to 588 products, giving the ideal combination of more choice and lower rates.

One figure that has remained fairly static over the decade however is the average standard variable rate (SVR), but rather than falling, it's increased by 0.12% since 2009. This highlights the growing need for homeowners to consider remortgaging rather than reverting to their lender's SVR, particularly given how low average rates are at present. The question is, would you opt for a short or long-term deal?

"During the past 10 years, not only have the two and five-year fixed mortgage rates dropped, but the gap between the two has more than halved, falling from 0.83% in 2009 to stand at a difference of only 0.4% today," noted Darren. "This could be a significant factor for borrowers when considering whether to fix for the short or longer-term, especially with the current economic uncertainty."

This all sounds like great news for borrowers, but it's important to be aware that the lending landscape has changed dramatically in the last decade, with the Financial Conduct Authority having introduced clear affordability measures that mortgage providers are required to follow. As a result, lending criteria is much stricter than it was before the financial crisis, with providers going through your income and outgoings to ensure you could afford the repayments both now and should rates rise in the future.

That said, it's still possible for many people to secure a good deal, particularly if they seek the necessary advice first. "If you are ever unsure whether or not you will be accepted for a particular mortgage product, it is always wise to speak to a mortgage broker first to try and limit the chance of an application being rejected and, as a consequence, negatively affecting your credit score," concluded Darren.

Find out more about improving your credit rating to boost your chances of acceptance, and check out the best mortgage rates to get an idea of the options available.