Mortgage product choice spikes to pre-pandemic levels

Rozi Jones
7th June 2021
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"While improvements in availability were recorded across the majority of the LTV tiers, it was at 95% LTV that nearly a quarter of the new deals were launched."

The latest Moneyfacts data reveals a spike in mortgage product choice as providers cater to borrower demand – a confidence expected to prevail in the months to come.

At 4,243, product choice is at the highest level recorded since the onset of the pandemic, after rising for the eighth consecutive month. The tier to see the largest uplift was 95% LTV, where there has been a rise of 80 products.

Rate competition has also stepped up in some LTV sectors; some providers have launched eye-catching sub-1% deals in the lower LTV brackets and competitive repricing has been evident in the higher LTV tiers.

However, growth in the number of higher LTV, higher rate deals and rate rises in the mid-LTV tiers fuelled increases to the overall two and five-year fixed rate averages, now 2.59% and 2.82% respectively. While these averages are above those recorded this time last year when availability was low, when compared to June 2019, the average five-year fixed rate is 0.03% lower.

Eleanor Williams, finance expert at Moneyfacts, said: “Homeowners’ aspirations to acquire larger living space and to make the stamp duty holiday deadline has pushed up UK house prices and while the demand for a dwindling supply of property continues to increase, there has been a notable surge in mortgage borrowing. Lenders are reacting by improving product choice, with 316 more products now on offer compared to last month, seeing overall mortgage availability top 4,000 products for the first time since the pandemic’s impact began over a year ago. Recently published UK Finance data recorded the highest number of house purchase advances since August 2007, and also showed first-time buyer advances were the highest on its records at 42,330.

“While improvements in availability were recorded across the majority of the LTV tiers, it was at 95% LTV that nearly a quarter of the new deals were launched. Over the course of the past month, 33 new two-year fixed rate products were launched, seeing the average fixed rate drop by a substantial 0.14% to 3.88% – the lowest this has been since it fell to 3.28% in June 2020, when availability had shrunk to just 31 deals. Those seeking a five-year fixed rate in this tier have 27 further product options launched this month, and also saw a notable drop in the average rate, falling by 0.10% to sit at 4.07%. While these remain some 0.63% and 0.40% above where these rates were in June 2019, it seems that the trajectory is moving in the right direction. The resurgence of high LTV products and the fact that their average rates are beginning to fall is particularly good news for first-time buyers, especially considering that Nationwide Building Society’s recent House Price Index Report found that house prices have risen nearly £24,000 over the past year, meaning that building that 5% deposit is even harder now.

“As well as changes in the top LTV tiers, rate competition has become evident at the opposite extreme of the LTV spectrum, with a number of lenders launching eye-catching sub-1% mortgage deals in the lowest LTV brackets. These record-low rates are available to low-risk borrowers with high levels of equity, but as to whether this competition will extend to higher-LTV deals remains to be seen as we navigate the full economic impact of the last year."

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