The average 2-year fixed mortgage rate has fallen from 2.48% to 2.46% in the last month.
Average mortgage rates for 2-year and 5-year fixes have fallen in the last month, Moneyfacts has found.
The average 2-year fixed mortgage rate has fallen from 2.48% to 2.46% in the last month, while the average 5-year fixed mortgage rate has also fallen from 2.84% to 2.79% over the same period.
Darren Cook, financial expert at Moneyfacts, said: “After a couple of months of marginal rate movement, it seems that rate competition has returned to the fixed mortgage rate market and that lenders have been focusing on the 5-year fixed rate sector in particular.
“Those providers making significant cuts to five-year fixed products include Barclays Mortgage by up to 0.07%, Coventry Building Society by up to 0.10% and Santander with large cuts of up to 0.24%.
“It appears that the recent fixed mortgage rate cuts and the resurgence of rate competition has been driven by a fall in interest rate SWAPs, a market that lenders generally use to hedge themselves against future interest rate fluctuations.
“The significant fall in SWAP rates indicates that markets may have already factored in a base rate cut in the short term.”
The largest rate reduction has been recorded in the 5-year maximum 80% loan-to-value (LTV) tier, which has fallen by 0.09% to 2.78%, followed by the 5-year maximum 70% and 85% LTV tiers, which have both decreased by 0.07% to 2.99% and 2.80% respectively.
Cook added: “Since the beginning of this year, our analysis shows that the strongest rate competition appeared to take place at the maximum 95% LTV market, with lenders attempting to attract potential first-time buyers, which are considered the lifeblood of the mortgage and property market.
“As a result, the two-year average fixed rate at this tier was driven down from 3.46% on 1 January to 3.24% by 16 May, where this rate has relatively remained unchanged since.
“Mortgage lenders may now feel that higher LTV tiers – often considered riskier – may have been cut enough and some larger mortgage lenders are focusing on decreasing rates at the lower-end tiers, with the view of retaining existing mortgage business rather than seeing this business drift away as the overall 2-year fixed mortgage rate is currently at a 52-week low of 2.46%.”
The only LTV tier in both initial rate periods to see a rate increase is the 2-year fixed at maximum 65% LTV, which has increased by 0.01% to 2.03% from this time last month.
