Mortgage product choices boom with some at 16-year high

Independent mortgage monitor service Moneyfacts says rises to average two- and five-year fixed mortgage rates have gained pace month-on-month.

The overall five-year fixed rate is now 0.43% lower than the average two-year, the largest gap between the two in six months.

It says that average mortgage rates on the overall two- and five-year fixed rate deals gained pace compared to the month prior, recording the biggest month-on-month jump since March 2024. These rates remain slightly lower compared to January 2024.

The overall average two- and five-year fixed rates rose between the start of April and the start of May, to 5.91% and 5.48% respectively. The average two-year fixed rate stands 0.43% higher than the five-year equivalent, the biggest difference seen in six months (November 2023 – 0.43%).

The average ‘revert to’ rate or Standard Variable Rate (SVR) remained at 8.18%, just shy of the highest recorded (8.19%) during November and December 2023 and the average two-year tracker variable mortgage fell to 6.12%.

Product choice overall rose month-on-month, to 6,565 options, its highest level since February 2008 (6,760).

The availability of deals at the 90% loan-to-value tier increased for a third consecutive month (791), now at its highest point in over 16 years (957 in March 2008). Meanwhile the number of deals at 95% loan-to-value rose for a fifth consecutive month (347) and stands at its highest count in almost two years (347 in June 2022).

And the average shelf-life of a mortgage product rose to 28 days, up from 15 days at the start of March 2024. The lowest shelf-life average on Moneyfacts’ records was 12 days in July 2023.

Rachel Springall, Finance Expert at Moneyfacts, says: “Mortgage rate rises have gained pace, with the average two- and five-year fixed rates increasing by 0.11% and 0.09% respectively, the biggest month-on-month jump since March 2024. This counters the more subdued rises seen a month prior, so rates are closing in to levels not seen since the start of the year. Volatile swap rates spurred lenders to review their fixed mortgage pricing, which has resulted in rises across all loan-to-value tiers on two- and five-year fixed mortgages.

“Borrowers may be concerned by these movements, but one positive point to take from the latest trends is that mortgage shelf-life has stabilised to 28 days. Despite lenders pulling selected fixed deals, some of which were priced below 5%, there was not a mass exit of products. It was evident that repricing during April was the clear focus among lenders, and in fact, mortgage product availability rose.

“Overall product availability is at its highest point in over 16 years, and another month-on-month growth, of 258 deals, is positive to see this month, but it fell short of the bumper 303 rise recorded the month prior. This thriving product availability is widespread across the underlining loan-to-value tiers, including those at 90% and 95%, so lenders are still improving choice for those with limited deposits or equity.

“Overall, there are more five-year fixed rate mortgages than two-year deals, and as has been the case since October 2022, the average five-year fixed rate remains lower than its two-year equivalent. However, the rate gap stands at 0.43% this month, the biggest for six months (November 2023 at 0.43%).

“Borrowers coming off a fixed rate mortgage this year will need to cover higher monthly mortgage repayments. Indeed, in May 2022, the average two-year fixed mortgage rate was 3.03%, and in May 2019 the average five-year fixed mortgage rate was 2.85%. It will still be cheaper for borrowers to grab a fixed mortgage now compared to sitting on a revert rate, based on average rates, and some borrowers may even consider a base rate tracker mortgage over the next two years if they are in line with economists’ predictions for the Bank of England to cut base rate this year.”