According to data from Moneyfacts, lenders have been most active at trimming rates in the last six months of the year as the competition has hit its peak, with average two-, five- and ten-year fixes at their lowest for the whole of 2019 this month.
The data helps illustrate why five-year fixes have now overtaken shorter versions in popularity.
But one area of the market which has been immune to the competition are standard variable rates (SVRs), which have remained unchanged at average of 4.9 per cent during the year.
Over the course of 2019, the average two-year fix dropped just 0.08 per cent, from 2.52 per cent in January to 2.44 per cent in December.
In contrast, the average five-year fix fell by 0.2 per cent from 2.94 per cent to 2.74 per cent by the end of the year.
Meanwhile ten-year fixes dropped even further to 2.77 per cent, almost matching five-year deals with a fall of 0.28 per cent over the course of 2019.
The competition and resulting cuts to margins have led to lenders, including big names such as Tesco and Sainsbury’s, leaving the market.
And many big high street lenders have cited tighter margins and falling profits in annual results.
First 15-year deal
Moneyfacts spokeswoman Rachel Springall noted there was a clear mortgage rate war at play throughout 2019, with the most notable drop in rates seen across the past six months.
“Whether this battle can continue at such a pace entering 2020 is unknown though, as lenders have already highlighted a squeeze on their profit margins as a result of pricing loans low,” she said.
“Santander, as an example, noted ‘a fall in income due to the highly competitive UK mortgage market’.
She added: “We even had the first 15-year fixed mortgage launched in 10 years in 2019, showing clear signs that lenders are tailoring their ranges to accommodate borrowers looking for a bit of security.
“The motivation to remortgage remains high due to the combination of little change in the average standard variable rate (SVR) this year and fixed rates falling.
“The amount saved on repayments between the average SVR and two-year fixed average rate is over £3,000 within the first year – which is based on a £200,000 mortgage over a 25-year term on a repayment basis.”
Moneyfacts also noted that while the year had been a positive one for borrowers, savers had been less fortunate with interest rates across the savings landscape plummeting due to economic uncertainties and a slowdown in competition.