Average mortgage rates have dropped to the lowest level ever, but still not as low as the government’s 0.1% base rate.
Moneyfacts finance experts say the average two year fixed rate is now 2.09%, but the biggest fall was 0.39% for five year fixed deals with the cheapest currently being 1.34% on a 60% loan to value offering from TSB.
The falling prices mark the re-starting of the housing market which has been badly hit by the coronavirus pandemic, but would be house buyers may not find signing a new deal as easy as they would have hoped as lenders have withdrawn 9 out of 10 low deposit deals.
Eleanor Williams of Moneyfacts said: “Product choice for borrowers requiring higher loan-to-value deals has plummeted for both two and five-year fixed rates.
“Looking at products often favoured by first-time buyers, at 90 per cent loan-to-value, the number of products available has dropped by 270 and 243 for two and five-year fixed rate options respectively.
“First-time buyers are therefore likely to feel the effect of the current circumstances even more keenly than most.
These borrowers are more likely to be looking for a low-deposit mortgage product, which, as a sector of the market, has contracted significantly.”
But it’s not all bad news. Green shoots of recovery for the market have been showing as some lenders have started re-introducing deals.
Said Ms Williams: “We are now beginning to see lenders relaunching products within their ranges, and some providers have eased the loan-to-value caps they put in place early in the crisis.
Mortgage lenders are still open for business and, for those eligible, rates are low.”
Fears of a potential property crash have prompted the Royal Institution of Chartered Surveyors (RICS) has urged the government to offer a stamp duty holiday to boost buyer confidence.
There is concern that the UK property market could drop by 13% according to figures produced by the Centre for Economics and Business Research with the majority of their members predicting falling prices because of the uncertainty of the economy which has ben widely predicted as going into a deep recession.
Lenders have dramatically cut the number of deals on offer at 90% or 95% loan to value since the pandemic started, leaving just a few available.
But the green shoots already showing in the market could possibly reverse the decline with new products being made available later in the year.
Said Eleanor Williams: “Those wanting to begin the process of re-mortgaging or purchasing should speak to their lender or an independent, qualified adviser, in order to lock in a low rate now or lay the groundwork to move forwards when the market rebounds.”