"Borrowers who may be arriving at the end of their current two-year deal will probably have a high motivation to remortgage."
Two and five-year fixed rates fell further over the last month in every LTV tier except for 95%, according to the latest figures from Moneyfacts.
Its data shows that the average two-year fixed rate has fallen from 2.464% to 2.440% in the last month, while the average five-year fixed mortgage rate has fallen from 2.786% to 2.739%.
The largest rate reduction has been recorded in the five-year 75% and 80% LTV tiers, which fell by 0.07% to 2.57% and 0.08% to 2.70% respectively.
The only LTV tier in both initial rate periods to see a rate increase was at the 95% LTV tier, with the two-year fixed 95% LTV rising by 0.03% to 3.26% and the five-year average rate at 95% LTV increasing by 0.01% to 3.64%.
Darren Cook, finance expert at Moneyfacts, said: “On 25 September 2017, the average two-year fixed rate reached its record low of 2.17%, which is 0.27% below the current average rate of 2.44%. This gives an indication that borrowers who may be arriving at the end of their current two-year deal will probably have a high motivation to remortgage.
“Not only is the jump from the average two-year fixed rate two years ago to the current average standard variable rate of 4.89% a significant increase of 2.72% – which would see interest payments more than double for those who remain on their current deal after the initial fixed rate period ends – but borrowers may need to look carefully to find a rate similar to the one they may have negotiated two years ago.
“However, it’s not just those coming to the end of a favourable fixed rate term that may have a high motivation to lock into a new deal, but those who are at the start of their journey. Borrowers looking to take their first step onto the property ladder may also feel a sense of urgency, with rates at the riskier LTV tiers of 90% and 95% LTV remaining static or increasing since the end of August.
“With the historic two-year fixes coming to an end this month, this may perhaps explain further why lenders are focussing on the lower-LTV tiers when competing on margins. Not only do mortgage providers need to compete for new business, but they also need to keep an eye on retaining their existing borrowers, keeping in touch with competitors’ mortgage rates to ensure that current customers consider their existing borrower products as their first option to remortgage.”