Competition intensifies with 5,000 mortgage deals now available

Competition in the mortgage market has intensified over the past 12 months, with more than 5,000 products now available — an increase of almost 10 per cent on the previous year. 

This has had a knock-on effect on pricing, with rates for both two- and five-year fixes falling, according to the latest data available from Moneyfacts. 

This squeeze on rates has come at a time when the Bank of England has increased the Base Rate, which would normally see a corresponding rise in the pricing of mortgage deals. 

Data collected by Moneyfacts shows that there were 5,001 mortgage products available in May this year, a 9 per cent increase on the 4,588 products available in May 2018. 

Over this period the average two-year fix has fallen from 2.51 per cent in May 2018 to 2.47 per cent in May this year. Five-year rates have also fallen, from 2.91 per cent to 2.85 per cent over the same period. 

In addition, this data shows that rates among the highest loan-to-value tiers have fallen the most over the past year, which may reflect more appetite from lenders to loan to first-time buyers. 

The average rate for a two-year fixed mortgage at 95 per cent LTV decreased from 4.11 per cent in May 2018, to 3.26 per cent this month, while the average rate for a 90 per cent LTV fell from 2.77 per cent, to 2.63 per cent, according to Moneyfacts. 

Meanwhile, average two-year fixed rates for lower LTVs increased over the past 12 months – albeit by a very small margin – which suggests that margins are so narrow in this area that rates are at the lowest lenders can afford.

This intense competition is started to have significant effects in the mortgage market. Earlier this week Tesco Bank announced it was pulling out of the mortgage market. This follows similar action by AA Mortgages, Secure Trust Bank and WHO 

When publishing its annual results this week,  Nationwide Building Society – one of the UK’s largest mortgage lenders, blamed this competitive market for a 19 per cent fall in profits. 

The building society said this drop in profits was despite the fact that its net mortgage lending had risen from £5.8bn to £8.6bn. It also said increased spend on digital services had lowered its profit margins.  

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