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Fixed rate mortgages fall to record lows with fewer products

Two and five year fixed mortgage rates have reduced to historic lows giving you the chance to save money by switching to a preferential rate.

The average fixed rates for two and five year mortgages have reduced to the lowest levels since July 2007 according to Moneyfacts, with -2,656 products withdrawn by lenders.

Two year fixed rates have reduced by -0.34% on average with five year fixed lower by -0.36% giving remortgage buyers the opportunity to switch to preferential rates reducing their monthly repayments.

At the same the number of mortgage products have reduced from 5,222 in March to 2,566 in May due to the lockdown making it difficult for first time buyers and home movers to buy property.

First time buyers with less choice

Lenders have been withdrawing products with high loan to values popular with first time buyers due to the risks to employment and affordability with the biggest decreases for 90% and 95% LTVs.

There are 24 two year fixed rate 90% LTV products in May reducing by -270 since March and only 11 of the 95% LTV products which are lower by -126 products.

For the five year fixed rate 90% LTV there are 26 products this month lower by -243 since March with 11 products at 95% LTV which are down by -131 products.

This table from Moneyfacts shows the two year and five year product numbers for March and May 2020.
Date March 2020 May 2020
All products 5,222 566
2 year (75% LTV) 291 201
2 year (90% LTV) 294 24
2 year (95% LTV) 137 11
5 year (75% LTV) 293 196
5 year (90% LTV) 269 26
5 year (95% LTV) 142 11
Lenders are focusing on existing customers or new homebuyers with deposits greater than 25% including buy-to-let investors as the lower loan to value of 75% reduces the risk of lending.

High loan to values of 95% has seen fixed rates rise since March by an average of 0.10% for the two year products and 0.04% for the five year products.

Eleanor Williams financial expert at Moneyfacts said, first-time buyers are therefore likely to feel the effect of the current circumstances even more keenly than most.

Fixed mortgage rates reducing

For homeowners with lower loan to value of 75% or less the two year fixed rates have reduced from 2.29% to 1.97% and five year fixed rates have reduced from 2.56% to 2.20% since March.

The primary reasons why fixed rates are reducing is more competition from lenders and lower cost of money available to banks by borrowing from other banks using money market Swap rates.

Swaps rise and fall based on interest rates or inflation and have been reducing during the Coronavirus crisis with the two year rates down from 0.711% in February 2020 to 0.360% in May.

Lower Swap rates give lenders the opportunity to reduce mortgage rates for borrowers and with high loan to value products withdrawn from the market, lenders are competing for a smaller market.

Existing homeowners can also benefit with the equity release buyer securing fixed rates from 2.8% using a lifetime mortgage accessing cash to consolidate debt, conservatory extension or purchase bi-folding doors.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or a buy-to-let investor.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even pay for care at home.

Learn more by using the equity release mortgage calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.

Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.


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