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Rates gap between two- and five-year fixes narrows; FTBs suffer high LTV ‘double whammy’

  • 28/10/2019
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Rates gap between two- and five-year fixes narrows; FTBs suffer high LTV ‘double whammy’
The difference between the average two-year and five-year fixed mortgage rate has narrowed by 0.11 per cent from 0.42 per cent to 0.31 per cent over the past 12 months.


Analysis by suggested this was the result of the average five-year fixed rate falling at a steeper curve – by 0.19 per cent to 2.76 per cent, down from 2.95 per cent 12 months ago.  

The average two-year fixed rate has fallen by 0.08 per cent to 2.45 per cent, down from 2.53 per cent over the same period.  

Moneyfacts’s research also showed the differential between the average two- and five-year fixed rate at 95 per cent loan-to-value (LTV) was 0.33 per cent.

The lowest differential in rate is 0.27 per cent at 75 per cent LTV. 


Price of stability

Darren Cook, finance expert at, said: “The difference between average rates at 75 per cent LTV is 0.27 per cent, whereas those first-time buyers who may be looking for a longer period of stability on a five-year mortgage can expect to pay a premium of 0.33 per cent over a two-year deal.    

“With the difference between the average two and five-year fixed rate narrowing to 0.31 per cent, the difference in the monthly repayment between these fixed terms is reducing too.  

On a repayment mortgage advance of £250,000 over a 25-year term, the average two-year fixed rate repayment is now £1,115.26, while the average five-year repayment is £1,154.56, a difference of £39.30 per month,” Cook added.


LTVs crucial for FTBs

Meanwhile, first-time buyers (FTBs) with a five per cent deposit were shown to have been hit by the “double whammy” of average product rates rising and the number of available products falling. 

AmTrust’s Mortgage LTV Tracker showed the average rate of a 95 per cent LTV product had gone up from 2.95 per cent to 2.97 per cent in Q3. 

The average rate for a two-year 75 per cent LTV mortgage dropped to 1.56 per cent from 1.65 per cent during the same period.

FTBs with smaller deposits would pay on average £1,011 a month marking the first time the Tracker’s monthly sum has surpassed £1,000. 

On the other hand, those with 25 per cent deposits pay on average £680 a month.  

Based on AmTrust’s data for Q1 and Q2, 95 per cent LTV borrowers have seen costs increase by £200 in six months. 


Fewer available deals 

AmTrust examined data from UK Finance and Halifax and used online mortgage search engines to determine how many products were available to those with a five per cent deposit. 

For a property worth £225,100 – the average price for FTBs according to UK Finance’s figures for August 2019 – there were 113 two-year 95 per cent LTV products available, down from 117 in Q2. For all mortgage terms, there were 260 products available, the same number of products recorded in the previous quarter. 

Based on the September Halifax House Price Index, which reported the average price of a FTB purchase at £232,574, there were 113 two-year 95 per cent LTV products available, down from 117 in Q2. For all mortgage terms, there were 260 products down from 268 in the previous quarter. 

For properties priced at more than £300,000 and qualifying for Stamp Duty, there were 112 two-year products available down from 115 in the previous quarter. For all mortgage terms it was 253 products, the same as Q2. 

According to the tracker, 1,111 products are available within these categories for 95 per cent LTV, compared to the 7,941 products in the 75 per cent LTV tier.  

There was an increase of 180 available products in the 75 per cent LTV tier since the last quarter. 


High LTV demographic

Patrick Bamford (pictured), business development director at AmTrust Mortgage & Credit, said: “In many ways, it’s a double whammy for low-deposit borrowers who appear to have been hit far more than others by the withdrawal of a number of lenders during the course of 2019.  

“With plenty of debate around the political future of the Help to Buy scheme, lenders active in the FTB market now need to think about their continued engagement with this borrower demographic and how they might approach the needs of high LTV borrowers.” 

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