The shelf life of a mortgage product is the amount of time it is available for customers to apply for it. This month’s dramatic plunge has been due to rapid changes in the market as rates have continued to fall, data from the Moneyfacts UK Mortgage Trends Treasury Report suggested.
The average mortgage rate for a two-year fix declined from 5.95% in July to 5.77% in August, while the average five-year fixed rate fell from 5.53% to 5.38%. This month-on-month drop marked the end of five consecutive monthly increases in average rates.
According to Moneyfacts, average mortgage rates are now at their lowest level since March.
On average, two-year fixed rates are now 0.39% higher than their five-year fixed counterparts, Moneyfacts found. Two-year fixed rates have been higher than five-year fixed rates since October 2022.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers will be pleased to see that fixed mortgage rates fell month-on-month, halting five consecutive months of rises. The average two- and five-year fixed mortgage rates fell by 0.18% and 0.15% respectively and are now at their lowest point since March 2024.
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“Lenders repriced their deals with vigour during July due to falling swap rates, and the volatility within the mortgage market was made clear by the notable drop in the average shelf life of a mortgage to just 17 days, down from 30 in June. There are expectations for rates to fall further in the weeks to come, particularly as the market reflects on the 0.25% base rate cut, the first cut in over four years.”
All mortgage rates down since July
The Moneyfacts data showed average mortgage rates had fallen across multiple loan-to-value (LTV) tiers.
At 60% LTV, the average two-year fixed rate dropped from 5.45% to 5.25%, while the average five-year fixed rate declined from 5.06% to 4.88%.
Rates were still higher than they were earlier in the year, however, when the respective averages at 60% LTV were 5.06% and 4.7% in February.
Pricing has come down since last year, when the average rate for a two-year fix at 60% LTV was 6.62%, and it was 6.16% for a five-year fixed rate.
The average two-year fixed rate for a 90% LTV deal fell from 6.18% to 5.98% month-on-month, while the average five-year fixed rate moved from 5.64% to 5.47%.
At 95% LTV, the average two-year fixed rate was 6.17% as of August, down from 6.26% in July. The average five-year fixed rate at this tier decreased from 5.78% to 5.67%.
The average standard variable rate (SVR) stayed fairly stable, moving from 8.17% in July to 8.16% in August.
Despite the base rate falling for the first time since 2020, to 5%, the average two-year tracker rate rose marginally from 5.94% to 5.95%.
More mortgage products at lower LTVs
The overall mortgage product count in August was relatively unchanged since the month before, with just one less option on the market, bringing the total to 6,657.
There was a wider selection of deals at the 60% LTV tier, rising from 741 in July to 755 in August.
Meanwhile, there were 758 mortgages at 90% LTV, down from 792 in July. There were also 353 mortgages available at 95% LTV, fewer than the 361 on the market last month.
Fluctuating options
Springall added: “The rise and fall of product choice was significant during July; the total count peaked at 6,949 on 19 July before falling to 6,621 just four days later. Choice slowly rose in the coming days to sit at 6,657 on 1 August, just one product shy of July’s total product count (6,658). The only increases in availability were seen in the lower 60% and 75% LTV brackets in August. At the other end of the LTV spectrum, in contrast to a prior rise in choice between June and July, the number of mortgages available at 95% LTV fell slightly by the start of August.
“However, the biggest month-on-month drop within any LTV bracket was at 80% LTV, which fell by 53 products, dropping to the lowest level since March 2024. This may come as disappointing news to borrowers with a limited deposit or equity, but choice could well bounce back in the coming months as lenders reassess their approach to lending at these higher LTV brackets.”
This article is based on one that was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Average mortgage product shelf life drops to just 17 days – Moneyfacts
