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Higher LTV rates record largest reductions in October

  • 11/10/2021
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Higher LTV rates record largest reductions in October
Competition remains strong among lenders as rates across higher loan-to-values (LTV) tiers has continued to fall month-on-month.


According to the latest Moneyfacts data, the largest month-on-month changes in rates between September and October were at the 90 per cent and 95 per cent loan to value (LTV) tiers, where the two-year fixed rates dropped to by 0.29 per cent and 0.25 per cent to 2.56 per cent and 3.32 per cent respectively.

Overall, the average two and five-year fixed rates fell for a fourth consecutive month. The average two-year fixed rate fell by 0.13 per cent to 2.25 per cent while the five-year equivalent dropped by 0.08 per cent to 2.55 per cent.

These are the lowest average rates since September last year, where the average two-year fixed rate was 2.24 per cent and the average five-year fixed rate was 2.49 per cent.

Product choice has continued to improve, with products rising by 127 from September to October to 4,939.

This is slightly below pre-pandemic levels of 5,222 in March last year but more than double the products available in October last year.

Eleanor Williams, finance expert at Moneyfacts, said that as living costs continued to rise falling mortgage rates were “good news”. 

She added: “Borrowers now have the chance to secure lower rates than were on offer a year ago when the sector was being rocked by the pandemic.

“In addition, those who took a now maturing two-year deal in October 2019 and those who locked in to a five-year initial term in October 2016, despite the turbulent past 18 months, may also be able to reduce their monthly mortgage payment outgoings, as the overall average rates are lower now than were on offer when they secured their current deals.”

According to Williams, that those with the smallest levels of deposit or equity would be “pleased” to see that the “most significant reductions” occurred at the higher LTV tiers. 

She added that whilst the average rates for 90 and 95 per cent LTV were now the lowest recorded during 2021, especially for a two-year fixed rate, first-time buyers may still elect for a five-year fixed rate.

“The gap between taking a two- or five-year fixed deal at these LTVs has widened month-on-month, however, first-time buyers may still prefer to lock into five-year fixed rate deal, especially with murmurings of an interest rate rise on the horizon,” added Williams.

She said: “Should base rate increase, those borrowers who are on a variable rate mortgage such as their lender’s standard variable rate would be at risk of seeing their monthly repayments rise, therefore the benefit of fixing to a new deal and securing a stable rate and payment are clear for many, particularly as there is no guarantee that average rates will continue their downwards trajectory.

“Those considering a new mortgage may wish to secure the knowledge and advice of a qualified adviser, who can help with assessing their priorities and calculating the best route forwards for their circumstances.”

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