The lender also highlighted that it was unlikely it would be able to compete with big lender’s pricing and their processing power in the vanilla market.

But it was positive that the vast majority of borrowers will continue to want to use an adviser during their mortgage application despite moves to open up the market to more direct sales.

Danger from big supply of money

Speaking at the Building Societies Association annual conference last week, Hinckley and Rugby BS chief customer officer Dean Waddingham noted that as technology improved, so mortgage products will get more complicated, rather than simpler.

“There will potentially be a plain vanilla market that will see applications go straight through – you’ve got ring fenced banks that will say yes and we won’t be able to compete with that,” he said.

“Then you’ll get all sorts of nuances away from there – different level of complexity, different risk models.

“And of course at the moment there’s a big supply of money, there’s a danger we do all drive for price and don’t start risk pricing anymore and that could end up in a horrible place.”

Vast majority will want advice

Discussing the market’s evolution with a panel of brokers and technology providers, Waddingham believed advice would still be the main route for mortgage borrowers.

“It’s interesting how the market will change. There will be niches of people who want to go direct and want to use that type of advice,” he said.

“There will be people who want to go through intermediated robo-advice. I still think the vast majority will still want an intermediary supporting them in there.

“And for a relatively small building society such as us, very small niches within the market could still be quite sizeable compared to our balance sheet, so it could still be worth us going for them.

“But I think in terms of the overall market, it’s going to be intermediated advice,” he added.

Open Banking not top of the list

Open Banking has also proved an increasingly positive development as it is rolled-out.

According to the Iress research released last week, 96 per cent of the lenders surveyed saw Open Banking as being beneficial to the mortgage process, sharply up from last year.

Waddingham confirmed the Open Banking had possibilities but said the lender was restricted in where it could invest.

“I can see advantages, it would be good to do, it would help with the underwriting and so on,” he said.

“But in reality we’ve only got so much resources and change capability, and is it top of our list right now? No.”

Leeds Building Society’s five-year cashback products have been reduced by 0.1 per cent.

The range now offers rate of 2.36 per cent at 65% loan to value (LTV) and 3.06 per cent at 90% LTV, as well as £1,000 cashback.

At the same time, the lender has increased the cashback on its two-year 75% LTV mortgage to £1,000.

Matt Bartle, director of products at Leeds Building Society (pictured), said: “We keep our mortgage range under constant review and try to offer a wide range of products to meet the needs of our customers.

“Our cashback range can give borrowers a little bit of extra flexibility at a time when they have other expenses,” he added.

Newbury tweaks shared ownership

Newbury Building Society has also cut the rate on its shared ownership variable mortgage from 3.24 per cent to 2.99 per cent.

The three-year discount is available at 95% LTV and has no early repayment charge (ERC).

Roger Knight, lending manager at Newbury Building Society said: “We’re delighted to further help those looking for a shared ownership mortgage by reducing our three-year discount mortgage product.

“No ERC means the borrower is able to clear their mortgage early with no penalty charges or exit the mortgage when they wish. This type of mortgage is perfect for those who value their flexibility or if their circumstances unexpectedly change.”

Accord cuts buy-to-let deals

The intermediary-only arm of Yorkshire Building Society Group has reduced all five-year buy-to-let mortgages, as well as select tracker mortgages by 0.30%.

It means Accord now offers 2.22 per cent fixed rates for five years at 60% LTV.

The lender has also launched a range of three-year fixed rates at 2.45 per cent for landlords with 40% deposits.

Toni Roberts, Accord Buy to Let’s mortgage product manager, said: “Uncertainty surrounding the wider economy and bank rates has meant brokers are telling us that landlords are keen to fix their repayments for longer.

“That’s why we’ve introduced three competitive three-year fixed rates and reduced all of our five-year fixed rate products. We hope they will prove popular with brokers and landlords.”

The average five-year fixed-rate deal is now 2.91 per cent, just 0.41 per cent higher than a two-year equivalent at 2.5 per cent, according to Moneyfacts.co.uk.

The gap has shrunk from 0.64 per cent in 2016 and from 0.44 per cent in 2018, taking it to the lowest level since 2013 when it was 0.27 per cent.

It comes after a number of big lenders sliced mortgage rates in January.

Moneyfacts spokeswoman Rachel Springall said: “While economic uncertainties could potentially put off home movers this year, it is still vital that the market keeps moving, or it could cause a standstill.

“Lenders must consider their levels of risk while also keeping rates low to pull in both buyers and remortgage customers.

“As the two-year fixed market becomes saturated with cheap deals, lenders will no doubt make efforts to compete on five-year deals.

“While it is difficult to predict what the mortgage market may face in 2019, it is still positive to see the rate gap shrink, particularly for those borrowers eyeing up a five-year fixed deal who want to avoid any potential interest rate rises for some peace of mind.”

In some cases, investment platform AJ Bell found that borrowers can pay up to £5,395 a year in extra costs on a £200,000 loan after their fixed-rate mortgage comes to an end. This sees them automatically moved over to a default rate, which can be more than three times the rate that was previously paid.

Standard variable rates move in line with changes to the Bank of England base rate. This has resulted in monthly mortgage repayments ratcheting up, following interest rate hikes.

“The Financial Conduct Authority has recently announced proposals to help the 140,000 ‘mortgage prisoners’ trapped on high rates and unable to move to a cheaper deal due to stricter lending arrangements.

“But there are still 1.8m people in the UK on standard variable rates, who are being penalised for their loyalty. Some don’t realise their fixed-rate deal has ended, while others haven’t got around to sorting out a new deal, and likely don’t realise how much extra it’s costing them,” explained Laura Suter, personal finance analyst at AJ Bell.

Counting the costs of default mortgage rates

In the table below, AJ Bell has outlined how much extra borrowers pay once they move over to a default mortgage rate.

Source: AJ Bell – based on the best two-year fix on a £200,000 loan at 80% loan-to-value.

The number of decade-long deals on the market has also increased by almost 10 times since 2014, according to Moneyfacts.

There are now 150 options in this sector, compared to just 16 deals five years ago.

More than 80% of the mortgages also offer a porting option for those who wish to move home during this period.

The typical rate has fallen from 4.61 per cent over the same time period.

Long-term fixed rates are good for borrowers looking for security in times of uncertainty, according to Darren Cook from Moneyfacts.

He said: “As consumers prepare themselves for another potential base rate rise this year, their thoughts will be on how to safeguard themselves from any increase in interest rates

“Despite lenders in the longer-term market demonstrating competitiveness and variety to attract borrowers’ attention, it’s unavoidable that they must factor in longer-term fluctuations and higher SWAP rates.

“This means 10-year fixed rates are still typically higher than those found in the more popular two and five-year fixed rate markets.

“Borrowers must also be aware that 10-year fixed rate mortgages are often accompanied by hefty redemption penalties, which require a borrower to be tied into the deal for the full length of the term.”

NatWest is to cut rates on select residential and buy-to-let mortgage deals.

The lender is trimming up to 50 basis points off remortgage and landlord mortgages in its core range

At the same time, in the semi-exclusive range the lender has launched two new 90% loan to value two-year remortgages.

Further rate cuts have been made to buy-to-let remortgages in the semi-exclusive ranges.

Mark Bullard, head of sales said: “We’ve taken this opportunity to review our proposition to ensure it is in line with current market conditions.

“We have been able to make some significant rate reductions, emphasising our intent to make 2019 a successful year.”

Ipswich launches first-time buyer mortgages

Ipswich Building Society has launched two deals for borrowers with a deposit of only five per cent.

The loans are available to applicants with gifted deposits, including entirely gifted funds for those who have been renting for 12 months or more.

One of the mortgages is a two-year fix rate of 2.93%, with a completion fee of £800.

And the other is a two-year discount rate of the society’s Standard Variable Rate (currently 5.74%) minus 3.01% to give a current rate of 2.73% with no completion fee.

The new deals are exclusive to property purchases within Suffolk, Norfolk, Essex, Cambridgeshire, Hertfordshire, Bedfordshire, and Buckinghamshire.

Richard Norrington, CEO of Ipswich Building Society said: “As a mutual organisation we are committed to supporting our members and local communities.

“I am delighted we are able to assist first-time buyers, purchasing their property in our heartland area, with these dedicated products.

“Our manual underwriting process allows us to better understand the personal circumstances of applicants, meaning we are often able to lend to people who might be turned down by a provider with an automated application process.”

The UK economy grew by 0.4% in the three months to October, down from 0.6% in the previous three months, data showed this week.

At the same time, the prime minister Theresa May has delayed a crucial parliament vote on her Brexit deal.

It means the uncertainty over how the UK will leave the European Union (EU) is set to continue for longer.

Markets now only give a 5% chance to the Monetary Policy Committee (MPC) raising the base rate in February, and 30% in May.

However, the chances applied to a May hike “looks like an overreaction”, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

He said: “Even if, as we still expect, the prime minister eventually forces a modified Brexit deal through parliament, the economic data likely won’t have perked up before the MPC’s meeting on May 2.

“Nonetheless, the committee regularly hikes due to its expectations for growth and underlying inflation, and it likely will expect both to strengthen, as investment recovers and the chancellor’s fiscal stimulus kicks in.

“As such, we still think the odds of a May rate hike exceed 50%.”

Strong wage and employment data released today could also strengthen the case for rates rising sooner rather than later.

Wage growth has increased to 3.3% both including and excluding bonuses, while employment is at a record high.

Tom Stevenson, investment director for Personal Investing at Fidelity International, said: “After yesterday’s weaker than expected GDP figures and more Brexit uncertainty after Theresa May’s last-minute decision to abort today’s Brexit vote, today’s wage growth figures provide UK workers with a little bit of pre-Christmas cheer.

“However, while we have now seen wage growth rise for four consecutive months, we are still not out of the woods.

“With the ongoing political and economic uncertainty, the recent steps forward could be reversed. Britain’s pay growth continues to lag our main competitors since the financial crisis.

“The current cocktail of concerns offers the Bank of England little incentive to hike interest rates any time soon.

“And even if the central bank does plan to increase rates over time, it expects to do so at a ‘gradual pace and to a limited extent’.”

The average two-year 95% loan to value (LTV) fix is just 3.54% in December, tumbling from a typical 6.52% in 2008, Moneyfacts found.

At the height of the financial crisis there were just 17 deals at this level of LTV, whereas that has since increased to 304.

At the same time, the number of 90% LTV deals has hit 656 – its highest ever level and up from 102 in December 2008.

The average two-year 90% LTV rate is now 2.7%, down from 6.53% 10 years ago.

Moneyfacts spokesman Darren Cook, said: “The latest figures show that the average two-year fixed mortgage rate at max 95% LTV has fallen from 4.15% this time last year to a record low of 3.54% this month.

“It is meaningful to note that this significant fall of 0.61% over the past 12 months is despite the Bank of England increasing the base rate by 0.25% in August this year.

“In comparison, the average two-year fixed mortgage rate at a maximum of 60% LTV has increased by 0.12% year-on-year, 70% LTV deals by 0.26%, 75% LTV loans by 0.25% and 85% LTV mortgages have risen by 0.21%.”

He added: “The higher LTV market looks to be showing healthy competition between providers as they vie for first-time buyers’ attention, however this seems to be moving in a completely different direction to the tiers that call on much larger deposits or require a greater portion of equity.”

Barclays and TSB are both reducing rates on select deals.

Barclays is trimming costs on two-year fixed rates between 60 and 75% loan to value (LTV), as well on its five-year 60 LTV rate.

It means the lender will now offer a five-year fix of 2.04% at 60% LTV with a £999 fee.

Barclays is to also launch a 1.99% five-year fix of 1.99% for remortgages at 75% LTV.

The changes come as TSB has reduced rates by up to 0.35% on five-year mortgages up to 95% LTV.

The lender has also snipped up to 0.25% off two-year fixes for remortgages and up to 0.2% from two-year fixed for purchases.

It comes after Tesco, Investec and Nationwide last week trimmed rates.

Nick Smith, TSB’s head of mortgages, said: “The interest rate reduction on our fixed rate house purchase and remortgage products is a welcome step for those looking to fix their monthly payments for a longer period of time.

“TSB is committed to helping people to borrow well and this rate reduction is an example of us doing exactly that.”

Mortgaged homeowners on reversion deals usually pay interest rates of 4% and higher costing around £7,500 a year on average, according to broker Private Finance.

A borrower who stayed on the SVR for 25 years would end up paying interest worth 65% of their original loan.

Overall £15.4bn is paid each year by borrowers on SVRs, Private Finance research showed.

Shaun Church, director at Private Finance, said: “Standard variable rates have always been uncompetitive, but with rates falling fast in recent years, the gulf between SVRs and typical mortgage rates is becoming increasingly apparent.

“Lenders are cashing in on borrowers’ inertia, charging rates that are more than two times the rate they would charge to new customers.

“Given so many borrowers end up sitting on an SVR rather than switching, we believe there is a strong market for 10-year fixed products, which require little effort from the borrower but guarantee a long-term competitive rate.”

He added: “A lack of flexibility can put some borrowers off these deals, so we would encourage lenders to consider products that allow borrowers to port or end their deal before the fixed period has ended without hefty charges.”