Average three-year fix falls below 3% for first time

Average rates for two and three-year fixed mortgage deals continued to fall in February as consumers enjoyed the widest choice of products since 2008, according to Mortgage Advice Bureau.

Related topics:  Mortgages
Rozi Jones
31st March 2016
decline graph chart down decrease drop

The average two-year fixed rate mortgage fell by 2bps to 2.54% in February, while the average three-year fixed rate mortgage rate fell to less than 3% (2.92%) for the first time, down by 9bps from 3.01%.

Average five-year fixed rate deals also declined by 2bps between January and February to 3.25% – just 1bp higher than August 2015’s record low of 3.24%.

In contrast, two year tracker rates have risen for three consecutive months, although they remain lower than in February 2015 (2.11%).

Typical two-year fixed rates have fallen by 60bps annually, while three and five-year fixed rates have fallen by 45bps.

A borrower who took out a two-year fixed rate in February 2016 will be paying £53 less a month on average in mortgage repayments compared to a year earlier, equating to an annual saving of £636. Borrowers with a three or five-year fixed mortgage are now paying £40 less a month – or £480 less annually – compared to February 2015.

Additionally, the total number of mortgage products rose by 3% in February to 17,654 – an annual increase of 36% from 12,940 in February 2015. This is the 13th successive month in which MAB has recorded an increase in the total number of products, surpassing January’s total of 17,132.  

The number of products sold via intermediaries increased by 3% from 12,180 in January to a post-recession high of 12,499 in February – the most since September 2008. This is an increase of 43% (or 3,731 products) from a year earlier, and maintains the intermediary channel’s share of mortgage products at 71% for the seventh month in a row.

There was also a monthly increase of 4% in the number of direct-only mortgage products during February, taking the total available to 5,145. However, direct-only mortgage products have risen by a far smaller proportion annually (24% - or 982 products).

Brian Murphy, head of lending at Mortgage Advice Bureau, commented:

“Given the current outlook, low mortgage rates look set to stay on the menu for some time. There is an appetite among lenders for business, and consumers are in a good position to reap the benefits of increased competition.

“The number of mortgage products available to consumers has grown exponentially over the past 12 months. Competition between lenders is now hotting up ahead of the spring bounce in market activity. This is good news for prospective borrowers, as they are able to choose from a greater range of products tailored to their individual needs.”

“Intermediaries’ share of product distribution remained above the 70% mark in February, reflecting the increasingly important role that brokers play in today’s mortgage market. It can be difficult for prospective borrowers to navigate an increasingly complex and diverse mortgage market, and post-MMR applications can be time-consuming. Many will find intermediaries are better positioned to meet their needs, as they can provide unbiased recommendations and have access to a huge number of products.”

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