Last month, the average two-year fixed-rate deal fell below 5% for the first time since June 2009. The number of two-year fixed-rate deals below 4% has increased from 53 to 94 in the last two months, and these products account for a quarter of all two-year fixes. Margins on two-year fixed rates now stand at the lowest level since August, and the average two-year fixed-rate stands at 4.86%.
In the last two weeks, among other rate cuts, Accord Mortgages cut its rates by 0.4%, Abbey by
up to 0.2%, Alliance & Leicester by up to 0.25%, Cheltenham & Gloucester by up to 0.1% and
Scottish Windows Bank by up to 0.4%.
Michelle Slade, spokesperson for Moneyfacts, said lenders finally appeared to be open for business and were introducing more competition into the market.
She added: “Although margins on two-year fixed rate mortgage deals steadily increased in the last year, they are now decreasing. Borrowers will be hoping that the early Christmas present they have received from lenders will continue into 2010.”
Ricky Okey, managing director of Abbey for Intermediaries, said intermediaries were keen to see more competitive rates in higher LTV products.
He added: “We are increasingly able to deliver good rates and our product range should highlight that competitive deals are on their way back.”
Katie Tucker, technical manager at broker Mortgageforce, welcomed the reduction in rates
but warned that this practice might not continue in 2010.
She said: “Two-year swap rates have fallen a lot in recent months and lenders have reacted quite well and they are now able to compete with each other at the higher LTV end of the market. However, if inflation rises over the next few years, the Bank of England will tackle this by putting Bank base rate up so swap rates may go up again.”
