With many lenders increasing rates on 60% loan-to-value (LTV) deals, taking the average rate to 2.23%, the data found that it may now be cheaper for borrowers to opt for a 65% LTV mortgage which are currently averaging 2.09%.
First Direct are among a number of lenders which have started to increase rates on their mortgage deals, following hints that a base rate rise could be on the cards in a matter of months. The lender has now upped the rate on its market-leading two-year fix which became available at the start of July from 1.49% to 1.69%.
Brian Murphy, head of lending at Mortgage Advice Bureau, said 65% LTV products were not as predominant in the market among lenders as 60% deals, which could explain why mortgages priced at this point were currently cheaper on average.
“It’s probably a bit of a one-off in reality, I wouldn’t have thought those types of rates are likely to be maintained for a particularly long period because what you tend to find is lenders will respond to protect their market position or their share,” he said.
Murphy added that while a number of lenders had increased rates on products, there had not been a significant shift to ramping up prices. But he added that the summer lull could be one factor which had driven up rates over the last month. Many buyers put off purchasing a home until the summer giving little incentive to lenders to enter into a rate war.
“I think it’s fair to say that this is a relatively quieter period,” said Murphy. “I would certainly expect to see the market gain a little more momentum on or around the first couple of weeks of September.
“Any product repricing that has taken place in the last couple of weeks may also have been tactical, where one or two lenders have come under pressure from things like service. But as yet I don’t see this being start of a significant rate rise occurring,” he added.