Rates are incredibly low, but so is product availability

12/07/2020

Two-year average mortgage rates have fallen to new lows, as choice at higher loan to values (LTV) remains limited. Rates now stand at 1.97% on a typical two-year fix, analysis by Moneyfacts. It is the lowest level in a year and compares to 2.49% in June 2019. The fall in rates is largely because the number of higher Loan to Value (LTV) products has fallen dramatically since the UK went into lockdown.
 
The higher LTV rates are usually higher, so without them the average has naturally decreased. Lenders that have been offering higher LTV mortgages in recent weeks have found they have been overwhelmed with demand. They have even limited availability to customers and brokers alike to makes sure they are not overwhelmed.
 
Hopefully more lenders will be able to re-enter the higher LTV area making more options available to borrowers. However, this will mean the average rate will begin to increase again. If you are in a position to look at your mortgage options, now would be a great time.
 
The number of additional mortgage products coming to the more market in June has flat lined. Product availability plunged by 2,656 between March and May as the UK and property market was in lockdown, according to Moneyfacts.co.uk. Between May and the beginning of June lenders started to widen choice by adding 244 deals to the market. However, this trend has not continued during the rest of June. Lenders have been particularly cautious around reintroducing higher LTV mortgages.
 
This is particularly disappointing to first time buyers who are already suffering from low savings rates and now extremely limited higher LTV mortgage products. There is huge demand for these type of mortgages, although lenders have an appetite to lend, keeping the mortgage market moving, the demand has been too much for them and caused most to take a step back to take stock of what the future may look like.
 
Many households have suffered over the last few months with reduced income, lack of job security and general upheaval. Soon we will see the first batch of mortgage holidays come to an end and potentially an injection of customers wanting to assess to current mortgage world.

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