Number of mortgage deals soars as rate cuts slow

The choice of low-deposit mortgages is now at its highest level in 17 years.

It’s an encouraging picture for the mortgage market as the number of deals available rose to 7,062 at the start of September, the highest count since October 2007, data from the latest Moneyfacts UK Mortgage Trends Treasury Report reveals.

Within this figure, the number of low deposit mortgages at 90% and 95% loan-to-value has seen a particularly noticeable increase, with these deals now making up 19% of the total market.

At the start of this month, there were 464 deals at 95% LTV and 896 deals at 90% LTV, their highest count since March 2008.

“The Government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive,” noted Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

“However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers,” she added, pointing out that interest rates on higher LTV deals dropped “by miniscule margins” this month.

Mortgage lenders adopt “cautious approach”

While mortgage rates continued to fall throughout August, they fell by smaller margins than the previous month. This may be explained by a number of factors, with Springall highlighting the “unsteadiness of swap rates” as a key reason.

“As we have seen countless times, lenders can adopt a more cautious approach to pricing their mortgages when swap rates rise, leading to small margins of moves,” she explained.

For example, the average five-year fixed mortgage rate dropped by just 0.01 percentage points in the month to September to 5.00%, compared to a drop of 0.07 percentage points in the month to August.

Even though the average two-year fixed mortgage rate fared slightly better as it finally dropped below 5%, falling from 5.01% at the start of August to 4.96% in September, this was a slightly smaller reduction compared to the previous month.

“Longer-term fixed rates are not seeing significant shifts, as over the past 12 months, the average two-year fixed rate has dropped by three times as much as its five-year counterpart,” Springall commented.

Discover the latest mortgage rates

Our mortgage charts are regularly updated to show you the latest rates available. However, bear in mind that the lowest rates may not always be the best or most suitable deal for your requirements.

Is it a good time to get a mortgage?

With rates on an overall downward trend, prospective borrowers may have waited before taking out a fixed mortgage in the hope that they could secure a cheaper deal.

But the direction of mortgage rates can be difficult to predict, so it may not always pay off to wait. Indeed, with the average Standard Variable Rate (SVR) standing at 7.32% at the start of September, borrowers who remain on their lender’s SVR for an extended period while waiting for rates to fall may end up paying more than if they opted for a fixed term deal.

Furthermore, Springall points out that those coming to the end of a fixed rate mortgage who want to stay with the same lender “could secure a new deal four months before their current initial rate ends”. This means you can lock in a rate in advance, but with the potential to change to a cheaper deal if rates fall significantly over the following weeks (subject to checks and the terms of the lender).

Elsewhere, prospective first-time buyers may also be wondering whether it’s the right time to enter the property market, particularly with the most recent House Price Index from Halifax finding that house prices rose to a record high of £299,331 in August.

Springall identifies affordable housing as a key issue for these borrowers but, more positively, notes that “lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder”.

Whether you’re remortgaging, moving house or buying a new home, it’s always worth speaking to a mortgage broker to help you navigate the market and find the right deal for your individual situation.

Should I speak to a mortgage broker?

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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