"There are expectations that the Bank of England will bring down base rate further next year, but recent events have led to uncertainty on fixed rate pricing."
- Rachel Springall, finance expert at Moneyfacts
Mortgage product choice has seen its largest reduction in over a year and the average shelf-life of a mortgage has plummeted to 17 days, according to the latest figures from Moneyfacts.
Product choice overall fell month-on-month, to 6,402 options, the biggest month-on-month reduction since July 2023. Product numbers are substantially higher than two years ago, as choice was significantly impacted in the aftermath of the fiscal announcement, with the number of available products falling to 3,117.
The figures also show that the average shelf-life of a mortgage product has dropped to 17 days, down from 21 days a month prior.
Average mortgage rates on the overall two-year fixed rate dipped by 0.01%, while average five-year fixes rose by 0.02% to 5.39% and 5.09% respectively. The two-year fixed rate has now been higher than the five-year equivalent since October 2022.
The average two-year tracker variable mortgage rose slightly to 5.71% and the average SVR fell to 7.95%. In comparison, the highest recorded was 8.19% during November and December 2023.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers will be disappointed to see product volatility within the mortgage market, as choice plummeted and the shelf-life of a deal plunged to 17 days, down from 21 days month-on-month. These moves make it essential for prospective borrowers to act quickly to secure a new deal. There will be many borrowers coming off a cheap rate in the months ahead, so it’s imperative they seek a new offer and not default onto an expensive revert rate. A longer-term fixed deal may be popular for peace of mind, but borrowers may remain on the fence on fixing for longer. There are expectations that the Bank of England will bring down base rate further next year, but recent events have led to uncertainty on fixed rate pricing. Swap rates have been on the rise since the Budget and lenders will traditionally increase fixed rates in response.
“First-time buyers looking to secure a deal will find a slight improvement in the availability of products at 95% loan-to-value month-on-month, and the average two and five-year fixed rates at this LTV ratio fell. However, the outlook for would-be buyers might not be very rosy, as fixed rates are forecasted to climb next year and the nil-rate threshold on stamp duty for first-time buyers will drop to £300,000 in March. It’s evident then, that new buyers will want to rush to make this window of opportunity, but this will be a hurdle if they have not accumulated a hefty deposit. Mortgage affordability remains a key issue for these borrowers, but their importance to keep the market moving is undeniable. It is essential lenders make every effort to support these borrowers while also encouraging their existing customers to secure a new deal.
“Lenders will no doubt be keeping a very close eye on the markets over the coming weeks and any borrowers concerned about mortgage affordability should seek independent advice with haste. As we have seen over the past month, mortgage deals are never guaranteed to last very long, and should this situation prolong, it poses a challenge for borrowers who are not quick off the mark.”
