Over the month, Moneyfacts recorded a rate reduction in the five-year maximum 80 per cent loan-to-value (LTV) tier by 0.09 per cent to 2.78 per cent. This was followed by the five-year maximum 70 per cent and 85 per cent LTV tiers, which have both decreased by 0.07 per cent to 2.99 per cent and 2.80 per cent respectively.
The only LTV tier in both initial rate periods to see a rate increase was the two-year fixed at maximum 65 per cent LTV, which has increased by 0.01 per cent to 2.03 per cent from this time last month.
Five year fixed rates hot up
Darren Cook, financial expert at Moneyfacts, said that as lenders continued to focus on the five-year fixed rate sector, the latest figures indicated that rate competition had “returned” to the market.
Providers making significant cuts to five-year fixed products include Barclays Mortgage by up to 0.07 per cent, Coventry Building Society by up to 0.10 per cent and Santander with cuts of up to 0.24 per cent.
He said: “It appears that the recent fixed mortgage rate cuts and the resurgence of rate competition has been driven by a fall in interest rate Swaps, a market that lenders generally use to hedge themselves against future interest rate fluctuations.
“Mortgage lenders may now feel that higher LTV tiers – often considered riskier – may have been cut enough and some larger mortgage lenders are focusing on decreasing rates at the lower-end tiers, with the view of retaining existing mortgage business rather than seeing this business drift away as the overall two-year fixed mortgage rate is currently at a 52-week low of 2.46 per cent.”