Mortgage offers showing the shortest lifespan in six months, as per recent research findings
In a recent development, the average shelf life of mortgage deals has decreased significantly, according to research published by the financial information service, Moneyfacts. The average shelf life, which stood at 28 days in early February 2024, has now shrunk to 15 days.
Rachel Springall, a finance expert at Moneyfacts, attributed this trend to the volatility in mortgage product availability. The fluctuating mortgage interest rates and lender risk management have led to a rise in both the overall average two- and five-year fixed rates.
This increased volatility has resulted in mortgage deals being secured for shorter timeframes than in periods of lower, more stable rates. In the span of February to March, average rates for two-year fixed deals increased to 5.76%, while average rates for five-year fixed deals rose to 5.34%.
The shortened rate lock periods have created a challenging situation for both borrowers and brokers. Jo Jingree, a financial advisor at Mortgage Confidence, expressed concern about lenders giving short notice of rate changes. She highlighted that taking out a mortgage is a huge financial commitment that could impact homeowners and buyers for years to come.
The decreasing shelf life of mortgage deals reflects a cautious lending environment responding to persistent high rates and market volatility. Homeowners and buyers are now faced with increased uncertainty and risk, as they must close their mortgage within a shorter window to avoid losing their locked-in rate.
This pressure to close quickly means that buyers and sellers need to expedite inspections, appraisals, and underwriting steps to avoid rate lock expiration. The shorter rate locks also make it harder for homeowners and buyers to plan budgets, as longer rate locks provided more certainty about monthly mortgage payments.
The persistently high rates around 6% to 6.7% create a challenging environment for many buyers, slowing demand and transactions. However, there is a glimmer of hope as the number of mortgage choices for borrowers has seen the biggest month-on-month rise in six months, surpassing 6,000 - the highest count in 16 years.
Ms. Springall suggests that borrowers may consider waiting for falling fixed mortgage rates, but she emphasizes the advantage of switching away from a Standard Variable Rate (SVR). For borrowers with a 5% deposit, the number of mortgage deals has increased, with over 30 deals available at 95% loan-to-value - the highest count since June 2022.
Experts are closely watching the Monetary Policy Committee and the swap rate market, as they predict whether mortgage rates will decrease this year. The research from Moneyfacts has come as a shock to homeowners and buyers, who are currently enjoying the widest range of mortgage options in 16 years. Despite the challenges, it seems that the mortgage market is showing signs of recovery, offering more choices to borrowers.
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