Low deposit mortgage choice boosted to 17-year high – Moneyfacts data

Moneyfacts UK Mortgage Trends Treasury Report data reveals the combined choice of higher loan-to-value mortgages (90% and 95% LTV) rose to its highest count in 17 years. These deals combined represent 19% of the residential mortgage market overall, where choice is at an 18-year high. Month-on-month the overall average two- and five-year fixed mortgage rates fell, albeit by smaller margins, and mortgage shelf-life held at 17 days.

• The combination in availability of deals at both the 95% and 90% loan-to-value tiers rose to 1,360 options, which is the highest point in 17 years (1,532 – March 2008).
• The availability of deals at the 95% loan-to-value tier rose to 464, now at its highest point in 17 years (575 – March 2008). The availability of deals at the 90% loan-to-value tier rose to 896, also at its highest point in 17 years (957 – March 2008). 
• Product choice overall rose month-on-month, to 7,062 options, its highest count since October 2007. 
• Average mortgage rates on the overall two- and five-year fixed rates fell by 0.05% and 0.01% to 4.96% and 5.00%, respectively, lower margins than seen the prior month.
• The average two- and five-year fixed rates were last lower in September 2022 (4.24%) and May 2023 (4.97%) respectively. 
• At the start of September 2024, the average five-year fixed rate was 5.20%; compared to the start of this month, the rate is 0.20% lower at 5.00%. However, the average two-year fixed rate has fallen by 0.60% over the same period, down from 5.56% to 4.96%.
• The Moneyfacts Average Mortgage Rate fell to 5.00%, its lowest point since September 2022 (4.29%). The rate is down from 5.04% month-on-month, lower than 5.44% since September 2024, and much lower than 6.41% in September 2023.
• The average two-year tracker variable mortgage rate has fallen to 4.66%.
• The average ‘revert to’ rate or Standard Variable Rate (SVR) fell to 7.32%. In comparison, the highest recorded was 8.19% during November and December 2023.

Rachel Springall, Finance Expert at Moneyfacts, said: 

“Borrowers with a limited deposit or equity of just 5% or 10% will find the choice of higher loan-to-value (LTV) deals has risen to its highest point in 17 years. However, it is worth noting these deals represent just 19% of the market overall, up slightly from 17% a year ago, while product choice as a whole for residential mortgages has expanded to its highest count since October 2007. The Government has been adamant that they want lenders to do more to boost UK growth, so a rise in mortgage choice is positive. However, it may be a bit too soon to celebrate, as affordability remains a critical hurdle for buyers, and those who want to secure their repayments for the next five years will find higher LTVs are only dropping by miniscule margins. Indeed, the average 95% and 90% LTV five-year fixed rates fell by just 0.02% and 0.01% month-on-month. 

“The margin of falls to the overall average fixed mortgage rates shrunk month-on-month, no doubt due to the unsteadiness of swap rates, with only 0.01% shaven off the average five-year fixed mortgage rate, and just 0.05% off the two-year equivalent (compared to 0.07% and 0.08% respectively a month prior). Longer-term fixed rates are not seeing significant shifts, as over the past 12 months, the average two-year fixed rate has dropped by three times as much as its five-year counterpart (0.60% versus 0.20%). Overall, the drop of just 0.04% to the Moneyfacts Average Mortgage Rate during August does not bode well for borrowers who were hoping for a rate war, but it is worth pointing out that economic unrest typically leads to rising swap rates, which forewarn lenders. 

“As we have seen countless times, lenders can adopt a more cautious approach to pricing their mortgages when swap rates rise, leading to small margins of moves, but deals can still be reviewed. During August, the average shelf-life of a deal was unchanged month-on-month at 17 days, so the churn of products did not calm. Therefore, borrowers will not want to miss out on securing a new deal, such as those remortgaging. In fact, those looking to stay with the same lender could secure a new deal four months before their current initial rate ends. This window has been shortened from six months by a handful of lenders since last year, as rate volatility calmed, so it could change if rates were to rise dramatically.

“First-time buyers may feel it’s not quite the right time to get a mortgage if they are struggling with the cost of living. However, lenders have been relaxing their stress testing over recent weeks by boosting loan-to-income multiples, so some buyers might be surprised to find they could now get their first foot on to the property ladder. Affordable housing remains a key issue, so there is always more room to help first-time buyers, who remain the lifeblood of the mortgage market.”