Mortgage options reach 16-year high as banks offer lowest rates since June

By Lars Mucklejohn

The number of mortgage options for borrowers has reached its highest level in almost 16 years, according to financial information website Moneyfacts, as banks slash rates to compete for business in a smaller market.

Moneyfacts also found that between December and January average two and five-year fixed mortgage rates fell for a fifth straight month to their lowest level since last June.

The average two-year fixed deal is currently 5.81 per cent, while the average five-year rate is 5.42 per cent.

Moneyfacts recorded 5,899 total homeowner mortgage products at the start of January, up from 5,694 a month before.

The last time it counted more products was March 2008, with 6,192 deals.

The average “shelf life” of these products has risen to 21 days, compared with 15 days this time last year. Last July, this period fell to just 12 days as lenders repriced their products to address interest rate hikes.

Over the last month, the number of deals for people with a five per cent deposit, often first-time buyers, has increased to 270 from 253.

Meanwhile, products for those with a ten per cent deposit rose to 733 from 718. The number of deals for people with a 40 per cent deposit increased to 682 from 623.

“Those comparing different mortgage offers may be pleased to see a big uplift in choice, as there was a rise of 200 residential mortgages month-on-month,” said Rachel Springall, finance expert at Moneyfacts.

“This was the biggest rise month-on-month in product choice since September 2023, which was an extremely busy period for lenders, when repricing was rife.”

She added: “A rise in choice and cheaper mortgage rates are promising signs for those looking to refinance this year.”

A raft of banks, including Halifax, HSBC, First Direct, TSB and Co-op Bank, have slashed their mortgage rates over the last week to compete for business in a market under pressure from high interest rates.

Lenders are betting that the Bank of England will succumb to mounting pressure to cut interest rates as soon as the spring following promising signs in its battle against inflation.

Mortgage rates are influenced by SONIA swap rates – the main interest rate benchmark in sterling markets – which have fallen below four per cent since December.