Average rates on 2-year and 5-year fixed mortgage deals across all loan-to-value (LTV) tiers have hit their lowest level in six months, according to the Moneyfacts UK Mortgage Trends Treasury Report.
Average rates on 2-year and 5-year products fell four the fourth month in a row.
Between the start of November and the start of December, average 2-year and 5-year rates fell to 6.04% and 5.65%, respectively – their lowest levels since June 2023.
The average 2-year fixed rate was 0.39% higher than the average 5-year, compared with a difference of 0.43% last month.
The average standard variable rate (SVR) remained unchanged at 8.19%, the highest level on Moneyfacts’ electronic records, which started in July 2007.
The average 2-year tracker variable mortgage rate rose month-on-month, to 6.16%.
Rachel Springall, finance expert at Moneyfacts, said: “Fixed mortgage rates have continued to drop across all loan-to-values (LTVs), month-on-month, on 2- and 5-year fixed terms.
“These falls will come as good news to borrowers across the spectrum, including first-time buyers.
“Those borrowers with small deposits will find that average rates are now down considerably from just a few months ago, with the average 2-year fixed rate at 90% and 95% LTV resting at 6.01% and 6.34% respectively, down from 6.81% and 7.10% in August 2023, which was the highest monthly point in 2023.
“This could improve the potential mortgage affordability of would-be buyers or those looking to remortgage with limited equity.”
The number of available products rose for a fifth consecutive month, to 5,694, the highest number in over 15 years.
The last time there were more deals available than this was March 2008, at 6,192 products.
The average shelf-life of a mortgage product fell to 17 days, as a result of continued reprices in the approach to the end of the year.
Springall said: “The choice of mortgage deals continued to rise month-on-month, including deals for borrowers with a smaller deposit or equity.
“Mortgages in the 90% LTV sector are in abundance, now with over 700 deals for borrowers to choose from, it is the highest count seen on our records in over a year (February 2022 – 735).
“This is promising as just one year ago there were less than 500 deals (December 2022 – 457).
“Those borrowers who can only stretch their deposit to 5% will find over 250 deals to choose from, compared to just 144 deals a year ago.
“It would be encouraging to see more appetite from lenders within the 95% LTV sector moving into 2024, particularly as the Mortgage Guarantee Scheme has been extended to the end of June 2025.
“The incentive to refinance may well be in the mindset for many borrowers as we approach the new year, but for those sitting on a standard variable rate (SVR), this may well be an even more pressing situation.
“Those coming off a two-year fixed will find the average rate is 3.70% higher on average (December 2021 versus December 2023) and that the average SVR is above 8%.
“Borrowers may then not be willing to wait for fixed rates to fall further and wish to lock into a fixed rate now for peace of mind.
“Lenders will no doubt be working hard to meet their end-of-year targets right now, indeed the average shelf life of a mortgage has fallen to 17 days, down from 20 days, so hopefully such vigorous repricing will result in better deals for borrowers desperate to refinance.”
