New data shows fixed mortgage rates are falling

Fixed mortgage rates are on their way down, according to Moneyfacts.

The average five-year deal fell from 2.84% to 2.79% in the last month, while the typical two-year fix dropped from 2.48% to 2.46%.

The reduction in mortgage rates is good news for borrowers, especially at this time of Brexit uncertainty when many households are concerned about their finances.  

The new data shows that the largest rate reduction has been recorded in the five-year maximum 80% loan-to-value (LTV) tier, which has fallen by 0.09% to 2.78%, followed by the five-year maximum 70% and 85% LTV tiers, which both decreased by 0.07% to 2.99% and 2.80% respectively.

In fact, the only LTV tier to see a rate increase is the two-year-fix at a maximum 65% LTV, which rose by 0.01% to 2.03%. 

Analysis

Darren Cook, a finance expert at Moneyfacts, said: "After a couple of months of marginal rate movement, it seems that rate competition has returned to the fixed-mortgage-rate market and that lenders have been focusing on the five-year sector in particular. 

"It appears that the recent fixed-mortgage-rate cuts and the resurgence of rate competition has been driven by a fall in interest rate SWAPs, a market that lenders generally use to hedge themselves against future interest rate fluctuations. 

"The significant fall in SWAP rates indicates that markets may have already factored in a base rate cut in the short term.

"Since the beginning of this year, our analysis shows that the strongest rate competition appeared to take place at the maximum 95% LTV market, with lenders attempting to attract potential first-time buyers, which are considered the lifeblood of the mortgage and property market."

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