What you need to know

  • The mortgage market continues to stabilise, with mortgage rates falling and product choices increasing

  • It’s the first time in over a year that the number of available products has surpassed 4,000.

  • Fixed rate products for those with 40% down are now back below 5% on average

In January, there were 3,643 different deals available, but there are now 4,341, the highest number since August.

According to financial information group Moneyfacts, average interest rates on both two-year and five-year deals fell for the third month in a row.

The rate on mortgages with a lower loan-to-value falls below 4%

It is now more affordable to get a two-year mortgage at 5.44% compared to 5.79% in January.

As a result of this latest drop, both products are back to their October 2022 levels, despite the Bank of England Bank Rate rising by 1.75% from October 2022 to October 2023. 

Furthermore, the average number of days that a mortgage is available before it is withdrawn has increased to 28 days, up from just 15 days in January.

What is the reason behind this?

Last September’s mini-Budget by former Chancellor Kwasi Kwarteng led lenders to withdraw products and hike rates. The mini-Budget led to a steep rise in government borrowing costs, which was reflected in the rate at which lenders borrowed money.

Banks and building societies pulled products for repricing, reducing the number of mortgage options to just 2,258 at the beginning of October. Since Jeremy Hunt became Chancellor and reversed almost all of the mini-Budget measures, the market has continued to recover steadily.

Mortgage rates have fallen as a result, despite the Bank Rate moving in the opposite direction.

What does it mean to me?

All deposit levels have seen an increase in mortgage availability. 606 products are now available for people with a 40% stake in their homes, the highest level since January and up from 484.

First-time buyers can also find good news, with 149 mortgages available with just a 5% deposit and 539 with a 10% deposit.

As rates fall across the board, the average cost of a five-year fixed rate product for those with 40% to put down has fallen below 5%, while the average cost of a two-year fixed rate deal for people borrowing 95% of the value of their home is 5.99%, and the average for a five-year fix is 5.53%.

How should I proceed?

If your lender is putting you on a standard variable rate when your existing deal ends, you may want to remortgage.

Standard variable rates are currently at their highest level since October 2008, at 6.84%. With a £200,000 mortgage, remortgaging to an average 5.2% fixed rate deal would save someone £200 a month.

The interest gap between five-year and two-year fixed rate products stands at 0.24%, the largest margin in 15 years. Lenders are currently more focused on long-term five-year fixed rate deals.

In the event that you have enough budget flexibility, you may want to consider a tracker mortgage.

As of right now, two-year tracker mortgages average 4.39%, although it should be noted that, unlike fixed rate mortgages in which the interest rate stays the same for the product term, tracker mortgages fluctuate with the Bank Rate.