The two-year fixed rate fell to 2.49% in October from 2.53% in September, according to the latest data revealed by Moneyfacts.
Finance expert at Moneyfacts, Charlotte Nelson, said that November 2017 marked the starting point of an upward trend in the average two-year fixed rate where it increased by 0.13% from October 2017, with subsequent month-on-month figures either rising or stagnating.
She said that Octover marks not only a break away from this upward trend, but the first time the Moneyfacts has recorded a reduction to the average mortgage rate since the November 2017 base rate rise.
She added: “With the average standard variable rate (SVR) increasing for a second month running, reaching 4.89% in October, the motivation to remortgage among borrowers is growing.
“This is highlighted by the latest statistics from UK Finance, recording a 9.2% increase in remortgage approvals compared to a year earlier. It is these additional remortgage customers that providers are vying to attract.
“This is not only seen by the decrease in average rate, but also the increasing number of lower loan-to-value (LTV) products.
“This month, the two-year SWAP rate has increased by 0.05%, rising from 1.12% in September 2018 to 1.17%, as rates react to other economic factors such as higher inflation.
“Although this would typically cause the average two-year fixed rate to rise, lenders are instead opting to swallow this extra cost for the time being in favour of retaining mortgage customers.”
Remortgages to get business quickly
Commenting on the Moneyfacts data, Alex Smith, mortgage adviser at Capricorn Financial Consultancy, said that it is not the first time that lenders have dropped rates to get more business by the end of the year.
David Hollingworth, from L&C Mortgages, said: “We have seen it before. In this particular time of the year, lenders are more focused on remortgages as it is a good way to get business quickly, rather than purchases. This is a signal that marks how competitive the market is.”
