The choice of mortgage deals is on the rise and interest rates are falling as market volatility is “easing”, experts at Moneyfacts have said.
According to the comparison site’s latest analysis, average mortgage rates on the overall two and five-year fixed rate deals have fallen for five months in a row, with rates dropping to 5.93 percent and 5.55 percent respectively by the start of January 2024.
The last time rates for these deals were below six percent was in June 2023. The average ‘revert to’ rate or Standard Variable Rate (SVR) also fell slightly by 0.01 percent, to 8.18 percent.
Meanwhile, the average two-year tracker variable mortgage rate fell month-on-month to now stand at 6.15 percent.
Product choice also increased month-on-month, for a sixth consecutive month, to 5,899 options – the highest level of availability in over 15 years.
Rachel Springall, a finance expert at Moneyfactscompare, said: “The consecutive reductions to the overall average two and five-year fixed mortgage rates will be of great relief for borrowers looking to refinance this year.
“The volatility surrounding mortgage rate pricing eased, as the average mortgage shelf life rose from 17 days to 21 days, the highest figure recorded in over six months.
“There are big expectations for fixed mortgage rates to fall in the coming weeks, so some borrowers may choose to wait patiently for the right time to change their deal or buy their first home.”
Those comparing different mortgage offers may notice there has been an uplift in choice as according to Moneyfacts’ analysis, there has been a rise of 200 residential mortgages month-on-month.
Ms Springall said: “This was the biggest rise month-on-month in product choice since September 2023, which was an extremely busy period for lenders when repricing was rife and the average shelf life of a deal was just 15 days.
“A rise in choice and cheaper mortgage rates are promising signs for those looking to refinance this year. However, those coming off either a two or five-year fixed mortgage will be paying around three percent more on their mortgage, based on our average rates, when they lock into a similar term for peace of mind.”
Despite this, Ms Springall noted: “It would be cheaper than reverting to a standard variable rate (SVR), which charges over eight percent on average.
“Borrowers with a limited deposit or equity, such as first-time buyers, are benefiting from an increase in product choice and lower mortgage rates.”
A number of banks and building societies are offering deals priced below four percent. HSBC and first direct are now offering rates at 3.99 percent.
Ms Springall continued: “The availability of deals at the 95 percent loan-to-value tier (270) has increased to the highest level since September 2022 (274) and the average two and five-year fixed rates at this tier are at their lowest since June 2023.
“However, if borrowers can stretch their deposit to 10 percent then they will find greater choice and cheaper rates.”
Ms Springall added: “Consumers would be wise to seek advice to assess the latest offers based on true cost and not be swayed by a headline-grabbing rate.”
