2 Year Fixed Mortgage Rates Drop For First Time In 12 Months

November 2017 marked the starting point of the upward trend in the average two-year fixed rate where it increased by 0.13% from October 2017, with subsequent month-on-month figures either rising or stagnating. However, this month marks not only a break away from this upward trend, but the first time the Moneyfacts UK Mortgage Trends Treasury Report has recorded a reduction to the average mortgage rate since the November 2017 base rate rise. Many would have assumed that the average rate would have increased in the aftermath of the base rate rise this August, however the opposite seems to be the case. Providers have started to reignite competition in the market to attract remortgage customers and retain their mortgage books. “With the average standard variable rate increasing for a second month running (reaching 4.89% in October) the motivation to remortgage among borrowers is growing. This is highlighted by the latest statistics from UK Finance, recording a 9.2% increase in remortgage approvals compared to a year earlier. It is these additional remortgage customers that providers are vying to attract. This is not only seen by the decrease in average rate, but also the increasing number of lower loan-to-value products. Previously, the number of deals had stagnated for those with lower LTVs, with competition reserved for more niche areas. However, as competition between providers has intensified, the number of deals in this area has subsequently increased. This month, the two-year SWAP rate has increased by 0.05%, rising from 1.12% in September 2018 to 1.17%, as rates react to other economic factors such as higher inflation. Although this would typically cause the average two-year fixed rate to rise, lenders are instead opting to swallow this extra cost for the time being in favour of retaining mortgage customers.