Mark Lofthouse, chief executive of Mortgage Brain, looks at how mortgage rates have plunged in 2015.
End of year analysis shows that mortgage rates are down across the board compared to 12 months ago - but those with low deposits are still paying a premium!
Mortgage Brain's latest mortgage product data analysis – a review of mortgage rate movement during 2015 - has revealed a very mixed picture for those looking for a loan. On the one hand, the last twelve months have seen the continuation of a decline in rates that has been going on for some considerable time.
Equally, those with smaller deposits are still having to pay a good deal more than their counterparts with larger deposits.
The analysis, which includes data up to 1st December 2015, is a breakdown of all main product types in the UK mortgage market for a repayment mortgage (purchase and Buy-To-Let) and is calculated by the lowest rate for a property worth £180,000.
Substantial rate falls for all throughout 2015
Let's look at the good news first: those looking for a mortgage today can find some very attractive deals. The fall in mortgage rates in many sectors over the last twelve months have been substantial, in some cases extremely so.
The lowest rate five year Tracker with a 60% LTV, for example, is now 41% lower than it was at this time last year – down from a rate of 3.39% in December 2014 to 1.99% as of 1st December 2015. To put this in financial terms, that offers a potential home buyer a potential annual saving of £2,100 on a £150k mortgage.
Short term purchase mortgages also offer some good savings compared to 12 months ago. With a current rate of 2.19%, the lowest rate two year Fixed mortgage (90% LTV) is now 24% lower than it was this time last year – down from 2.89% in December 2014 - and bringing a potential annual saving of £1,050.
Buy-To-Let mortgages have also seen falls – although not as sharp
The Buy-To-Let market has seen a similar trend over the past year as well. The lowest rate two year Fixed BTL mortgage with a 60% LTV, for example, is now 21% lower than it was this time last year (down from 2.34% to 1.84%), while the lowest rate five year Fixed product (60% LTV) is now 19% lower than it was 12 months ago – down from 3.69% to 2.99%.
Not everything in the rate garden is rosy, however. Although a twelve, and even a six month analysis, shows significant rate reductions, the short term analysis shows a slightly different picture with mixed movement seen for all main product types over the past three months.
The lowest rate two year Fixed product with a 90% LTV, for example, fell by 10% during the past quarter. The same product with a 60% LTV, by comparison, saw a 7% increase over the same period with its current rate of 1.14% up from 1.07% in August.
The lowest rate five year Fixed products with a 60% and 90% LTV also saw a rate rise of 10% over the past three months.
That trend is reversed, however, for the lowest rate five year Tracker (60% LTV) which is now 23% lower than it was three months ago, while its 90% LTV counterpart continues to offer a rate of 3.65%, a rate which has held static for many months.
Those with lower deposits still suffering
While rates as a whole may have fallen, those who can't raise large deposits are having to pay substantially more. As an example, our current data shows that the mortgage rate for the lowest 90% LTV two year Tracker at 1.94%, is 96% higher than its 60% LTV counterpart which is available with a rate of 0.99%
It’s a similar trend for short term deals with the lowest rate two year Fixed product with a 90% LTV (2.19%), 92% higher than the same product with a 60% LTV (1.14%).
It's not all bad news, though. In many cases the rate difference has fallen compared with twelve months ago. The lowest rate five year Fixed purchase mortgage with a 90% LTV is now available at the same rate as the same product with a 60% LTV. Twelve months ago the rate was 25% higher for the 90% LTV product!
What does it all mean?
Despite the recent increases in some of the rates, most borrowers are still better off than they would have been a year ago, some to the tune of thousands of pounds.
This is clearly good news for those in the market for a mortgage.
Having said that, the latest quarterly analysis gives a considerably more muddied picture. The much anticipated rise in base rates keeps being pushed back (the latest meeting of the MPC voted 8-1 to keep rates at 0.50%) but it may just be that with the US recently increasing rates, the UK might be getting ready to follow suit.
For those with small deposits, meanwhile, the news is disappointing. Although rate differences have continued to diminish, the substantial reductions of a year ago have not been maintained. The message, therefore, is pretty clear; – the bigger deposit first time buyers can build up the better.
