The range of mortgage products available in the UK fell last month as lenders took a more cautious approach to pricing.
But fixed rates are edging tantalisingly close to dipping below 5%, according to the latest Moneyfacts UK Mortgage Trends Treasury Report.
Overall choice dropped to 6,842 products in August, down from the previous month’s rise, though still up year-on-year (6,657 in August 2024).
The average shelf-life of a deal increased slightly to 17 days, compared with just 13 days two years ago.
THREE YEAR LOW
The big news for borrowers is that both the average 2-year and 5-year fixed rates now sit at 5.01%, the lowest since 2022/2023 and significantly down from the peaks seen after the mini-Budget. Over the past year, the average 2-year fix has fallen by 0.76% and the five-year by 0.37%.
However, the average Standard Variable Rate (SVR) remains steep at 7.42%, making the gap between a fixed deal and reverting to SVR more than 2% – a stronger incentive to remortgage.
KNIFE-EDGE DECISION
Rachel Springall, finance expert at Moneyfacts, says lenders’ “mixed attitudes to pricing” are partly due to uncertainty following the Bank of England’s knife-edge base rate decision last week, which nudged swap rates higher.
She warns: “Lenders may well take a low-and-slow approach to cuts over the next few weeks.
“The markets could react badly to the Autumn Budget, and if inflation or economic uncertainty spikes, borrowers can forget about more base rate cuts this year.”
For first-time buyers, product choice at higher loan-to-values remains patchy, despite small fixed-rate drops.
Changes to loan-to-income (LTI) rules later this year could have a bigger impact, making professional mortgage advice essential.
