Lenders appear to be falling over themselves to cut rates. However, a close look shows much of this price-cutting is limited to products in the lower LTV brackets. Every mainstream lender is going to want its share of this activity but there is a finite amount of business available. Dropping rates to below 1 per cent will bring in some business but we have probably reached the bottom in terms of pricing.
Instead, we should look above the lower LTVs at the “price cuts” being achieved. It has been left to the smaller lenders – to be accurate, the smaller building societies – to pave the way and they have been willing to make significant reductions, often to historically low rates. Some have been able to get 90 per cent LTV products down below the 3 per cent mark; others close to 4 per cent for 95 per cent.
It is also interesting to see the growing market clamour for fixed rate products: over 90 per cent of new advances are now taken on a fix. Given recent soundings from the Bank of England regarding base rate increases there is growing value in tracker and discounted-SVR rates, particularly over a two-year time frame. If we are looking at a 2015 shorn of any base rate rises and a 2016 with maybe two quarter per cent increases, there is value to be had over the same period with the most competitive trackers and discounted-SVR products compared to fixed rate deals. This is particularly so for those at higher LTVs.
Rob Clifford is chief executive of national mortgage broker If I Were You