Mortgage bonanza as number of deals hits 15-year high – what it means for first-time buyers and homeowners

THE number of mortgage deals has hit a 15-year high as lenders kick off the new year with rate cuts.

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In July 2023, a mortgage typically remained on the market for just 12 days before disappearing, Moneyfacts also found.

The finance experts counted 5,899 homeowner mortgage products at the start of January 2024, up from 5,694 at the start of December 2023.

These products include a range across all deposit sizes.

Previously, the last time there were more deals than this available was in March 2008, when there were 6,192 products, according to Moneyfacts.

Within this month’s total, the number of deals for people with just a 5% deposit, has increased from 253 in December to 270 in January.

These kinds of deals are often for first-time buyers to hop on the property ladder.

The total number of deals for those with a 10% deposit increased from 718 to 733 over that same period.

Plus, the number of products for people with a hefty 40% deposit went up from 623 to 682 between December and January.

The average “shelf life” of a mortgage product has also increased compared to this time last year, from 15 to 21 days.

Several big-name lenders, including Halifax, HSBC UK, First Direct and TSB have cut their mortgage rates in the new year.

Halifax, was the first to cut some interest rates by close to one percentage point, with others also following suit.

The bank reduced rates by up to 0.92 percentage points for product transfers and 0.83 on remortgages.

Leeds Building Society was next to announce a string of cuts of up to 0.49 percentage points on its products.

Its cheapest two-year fixed now sits at a rate of 4.6%.

HSBC then announced cuts to its fixed rates, in a further boost for mortgage borrowers.

The new deals include a five-year fixed remortgage deal of 3.94% for those borrowing up to 60% of the property value.

From Friday last week, First Direct also cut rates across its fixed-rate repayment mortgage range, with deals below 4% now available.

TSB also announced cuts to some of its two-year-term mortgage rates, including reductions of up to 0.55 percentage points for first-time buyer deals and home-mover products.

On Tuesday the Co-op Bank is expected to cut mortgage rates by up to 1.26 percentage points and release a two-year fixed-rate deal at 3.85% for existing customers whose fixed deals are ending.

The recent drops are good news for prospective buyers or those looking to remortgage.

That’s because the more deals there are, the more choice customers have.

Rachel Springall, a finance expert at Moneyfacts, said: “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.

“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, and the average shelf life of a deal was just 15 days.

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

The reason behind the rate cuts is due to swap rates falling, these are used by lenders to price mortgages and they have been easing.

However some experts suggest that banks won’t be able to compete on rates for long, and this could lead some to increase them rather than make further cuts – though it’s impossible to predict what will happen in the mortgage market.

“What is important to stress is while markets seem stable, they are still prone to movement so anyone anticipating when the right time to fix is incredibly difficult,” said Nicholas Mendes​​​​, head of marketing at John Charcoal.

Some analysts are now expecting mortgage rates to drop again this week, perhaps to their lowest since September 2022.

Danny Belton, head of lending at the Mortgage Advice Bureau, said on Wednesday: “The drop we’ve seen in mortgage rates is due to swap rates falling and lenders passing on the reductions to customers. This could be a sign of things to come, and we could see more lenders reduce rates in the coming days and weeks.”

The Bank of England (BoE) has increased rates steadily for nearly two years now, the base rate currently stands at 5.25%.

It is expected to drop further this year.

Rising interest rates have led to the cost of mortgage borrowing increasing, which is pricing out many buyers.

This has caused lenders to fall behind on their targets.

To do business, banks and building societies are having to decrease their rates, in some cases making very small margins.

The BoE will next vote on whether to cut rates on February 1 before a further meeting on March 21.

Despite the BoE’s insisting that rate cuts aren’t yet on the cards, many experts believe slowing wage growth and sharply falling inflation will give policymakers room to start reducing in the first half of this year.

How to get the best deal on your mortgage

If you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.

But there are several ways to land the best deal.

Usually the larger the deposit you have the lower the rate you can get.

If you’re remortgaging and your loan-to-value ratio has changed, this could also give you access to better rates than before.

A change to your credit score or a better salary could also help you access better rates.

If you have a fixed rate, you could see higher rates when you come to the end of the current term after thirteen Bank rate rises since December 2021.

And if you’re nearing the end of a fixed deal in the next six months it’s worth contacting your broker now to lock in a rate.

If they come down between now and the end of your deal, you can always apply for another rate before you remortgage.

Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.

But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.

To find the best deal use a mortgage comparison tool to see what’s available.

You can also go to a mortgage broker who can compare for you, with most offering free advice to secure you the best deal for you.

Some brokers charge for advice, so ask them first.

It could cost a couple of hundred pounds but it might save you thousands on your mortgage overall.

You’ll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it to the cost of the mortgage, but beware that means you’ll pay interest on it and so will cost more in the long term.

You can use a mortgage calculator to see how much you could borrow.

Remember, if you decide to remortgage to a new lender you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks, and looking at your credit file.

You may also need to provide documents such as utility bills, proof of benefits, your last three months’ payslips, passports and bank statements.

It’s possible to avoid new affordability checks by remortgaging to a new deal with your existing lender, provided you don’t want to borrow more or extend your term.

Meanwhile, we reveal what will happen to interest rates in 2024 and what it means for your mortgage.

Plus, millions of Brits will want to be in the know ahead of 17 money changes set to hit this year.

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This post first appeared on thesun.co.uk