Mortgage rates have been falling as lenders up the ante to entice buyers to the market, with increased activity expected in the second half of the year.
Summer mortgage activity is heating up for borrowers with lenders competitively repricing their products over the past couple of weeks, which will be welcome news for anyone looking to remortgage or take out new borrowing.
The latest data from Moneyfacts has revealed that the average mortgage rate has fallen to 5.07% across all fixed terms and loan to value (LTV) brackets, compared with 5.14% at the same time last month.
This falls to 5.05% for the average two-year fixed rate and 5.04% for the average five-year fixed, while two-year variable rates are sitting at an average of 4.91% at the moment.
This week, more major lenders entered the fold to offer competition-beating mortgage rates, with Halifax cutting selected fixed rate products by up to 0.15%, while Barclays slashed theirs by up to 0.52%, with a couple of new deals thrown into the mix.
Product numbers are also surging, with a wider selection of deals available to borrowers, giving greater flexibility to choose an option that suits individual circumstances. Moneyfacts found that there were now 6,908 products in total, up from 4,396 back in July 2023.
Affordability boost
Lenders have not only been offering more attractive mortgage rates, enhancing the borrowing ability of millions of new and existing property owners; they have also been relaxing their stress test rules. This could mean borrowers can borrow higher amounts, unlocking higher priced properties.
Rachel Springall, finance expert at Moneyfacts, said: “There are expectations for fixed rate cuts to heat up this summer across the spectrum, fuelled by swap rate volatility.
“The mortgage market has shown how far it has improved over recent years, as borrowers who locked into a two-year fixed rate deal back in July 2023 would have been paying 6.41% in interest on average, compared to 5.09% now. That is a difference of £199 per month in repayments on a £250,000 mortgage over 25 years.”
The huge growth in the number of deals on the table is also a boost to market sentiment, Springall notes, which is “far beyond the upheaval endured by the mortgage market two years ago, when there was a drop of 571 products between the start of June and July 2023”.
For first-time buyers, affordability is still key, with many worried about the end of the Mortgage Guarantee Scheme. However, the government is due to announce a replacement for the scheme shortly, and this alongside improved mortgage rates should buoy the first-time buyer market.
Buy-to-let mortgage rates
There have been plenty of positive movements in buy-to-let mortgage rates too, offering relief to many landlords who may be due to remortgage or expand their portfolios with borrowing this summer.
Last week, LendInvest announced a reduction in mortgage rates across all of its buy-to-let products, creating the lowest initial rate on the lender’s range for three years.
The cuts include standard buy-to-lets, as well as more specialist products such as those geared towards houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs).
Major lenders have also been making cuts to buy-to-let mortgage rates for landlords, including Barclays which has made several rate drops for both purchase and remortgage customers in the space.
Furness Building Society has also slashed its interest rates on buy-to-let products, while the likes of Darlington Building Society and Hampshire Trust Bank have launched new buy-to-let and specialist mortgage options.
Strong buyer activity
A separate report from Stonebridge has revealed a 42% jump in mortgage applications in June compared with 12 months ago, with borrowers being an average of £888 a year better off due to mortgage rates falling by an average of 62 basis points.
Stonebridge chief executive Rob Clifford says: “While inflation remains elevated, we believe the Bank of England will cut rates at least once more this year – potentially at the Monetary Policy Committee’s next meeting in August.
“Any further cuts should feed through into lower mortgage rates in time, which should strengthen affordability and tempt borrowers back to market in greater numbers.”
Clifford added that the “green shoots of recovery are already visible” thanks to heightened mortgage applications, which is a “clear sign that buyer confidence is returning”.
“Any further falls in rates could supercharge that momentum, supporting both mortgage lending and housing market activity in the second half of the year.”
