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Mortgage market: Borrowers are benefitting from more deals on offer

The UK mortgage market has seen product numbers increase and rates have edged further down, which will likely be welcome news for borrowers.

The latest research from Moneyfactscompare.co.uk has revealed that there are now more than 5,000 deals available on the mortgage market. This is the highest number of products available since February 2022 as there was a rise of 774 options month-on-month. And there was an increase of products across several loan-to-value (LTV) brackets.

In the mortgage market, the higher the level of product choice available, the more competitive the landscape. So, higher numbers of deals on offer are always a positive sign. This demonstrates confidence among lenders, which in turn gives homebuyers and property investors more drive to proceed with property purchases.

This is encouraging news as we’re around six months on from the uncertainty surrounding interest rates after the mini-budget in September. Following that, many lenders withdrew their products from the mortgage market as they considered how to reprice their range of deals. But product choice has recovered now.

What’s happening to mortgage rates?

The Bank of England base rate was increased in March in response to climbing inflation levels. This rate currently stands at 4.25%. Naturally, this has caused variable interest rates to increase. But despite rising interest rates, fixed-rate mortgages have been falling in recent months.

The best deals available currently have rates of less than 4%, according to Zoopla. And Moneyfactscompare.co.uk pointed out that borrowers with a larger deposit of 60% LTV for a two-year or five-year fixed mortgage stand below 5%.

But it’s important to compare both rates and the overall mortgage packages to ensure you understand the true cost of any deal. And this is where independent financial advice from a mortgage broker can prove to be particularly helpful.

Many prospective homebuyers, property investors and those looking to remortgage will likely be watching to see the outcome of the Bank of England’s next base rate setting meeting on 11 May, and whether this will have a knock-on effect across the mortgage market.

What’s expected for inflation and interest rates?

Mortgage rates are expected to reduce over the next few months. But the future of the mortgage market will be determined by lenders’ appetite for business and fluctuating swap rates.

Inflation and the cost of living remains high and is currently being impacted by events such as the war in Ukraine pushing up energy prices. As inflation is staying stubbornly high, this suggests that the Bank of England may increase interest rates further in May, and it could make further hikes later in the year.

However, economists are still predicting that inflation will start falling quickly in the second half of this year. Once inflation gets close to its 2% target, the Bank of England’s Monetary Policy Committee is then expected to consider cutting the base rate, which will impact the mortgage market.

Full relief for mortgage holders and borrowers may not be immediate. But as borrowing affordability improves, this will likely restore more faith in the UK property market. And there is still a huge level of confidence in the sector as it’s performed remarkably stable throughout economic headwinds.

Rightmove’s mortgage expert Matt Smith comments: “Despite the challenges posed by the unexpected news that inflation remains stubbornly high, which is impacting the underlying funding costs of fixed-rate mortgages, the resilience of lenders and their desire to compete for business has seen average rates for mortgage products continue to fall this week across most Loan-to-Value (LTV) ranges, albeit at a much slower rate.

“Looking forward, it’s likely that we’ll see lenders continue to try to hold the line on rates as competition remains the focus while they await the next Base Rate decision on 11 May. Despite this, we could see some rate increases in the meantime.”

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