The dynamics of the UK mortgage market are rapidly changing, as evidenced by new data from Moneyfacts which reveals that the average ‘shelf-life’ of a mortgage offer has significantly shortened, halving from 28 days at the start of May to just 15 days by the beginning of June. This swift change highlights the volatile nature of the current mortgage landscape.

Increasing Rate Pressure and Rising Product Availability

Despite the quick turnaround of mortgage products, the market has seen an increase in the total number of deals available, reaching a 16-year high with 6,629 different mortgage deals available at the start of June. This figure is the highest since February 2008, when 6,760 deals were recorded. Simultaneously, the average rates for both two-year and five-year fixed mortgages have crept upwards, currently sitting at 5.93% and 5.50%, respectively.

The Borrower’s Conundrum

Rachel Springall, Finance Expert at Moneyfacts, commented on the trend: “Borrowers may feel disheartened to see another consecutive month of rises to the average two- and five-year fixed mortgage rates. However, the incentive to fix for longer remains, as the average five-year fixed rate is 0.43% lower than its two-year counterpart.”

She also highlighted the strategic adjustments by lenders in response to the unpredictable swap rate market earlier in May, which contributed to the decreased shelf-life of mortgage products.

Market Dynamics and Borrower Advice

The surge in product availability is particularly beneficial for borrowers struggling to amass a sizable deposit. The rise in products at higher loan-to-value (LTV) ratios—such as 90% and 95% LTV—offers more opportunities for these individuals. Conversely, the options at a 60% LTV saw only a modest increase.

Springall advises borrowers concerned about future rate hikes to consider consulting with independent brokers who can provide options for locking in rates several months in advance. For those nearing the end of a fixed-rate period, especially the five-year fixes, the current market rates pose a stark contrast to those from five years ago, necessitating a reassessment of financial strategies.

Looking Ahead

As the UK edges closer to a General Election in July, the mortgage market remains a critical area of focus. With the potential for economic policy shifts, borrowers and lenders alike are navigating a landscape marked by both opportunity and uncertainty. The ability of consumers to secure favourable mortgage rates in a timely manner will be crucial as they contend with an evolving economic environment and the looming possibility of interest rate adjustments later in the year.

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Last Update: June 11, 2024