Mortgage shelf-life drops and rates fall: What it means for borrowers

If you’ve been keeping an eye on mortgage rates recently you might have noticed some significant shifts.

According to the latest Moneyfacts UK Mortgage Trends Treasury Report, the average shelf-life of a mortgage product has plummeted to just 16 days – a sharp drop from 36 days a month ago.

As someone navigating the mortgage landscape, this rapid pace of change raises some important questions: What’s driving this? And more importantly, what does it mean for borrowers?

In a notable move, both 2- and 5-year fixed mortgage rates have seen their biggest cuts in nearly six months. The average 2-year fixed rate dropped by 0.13%, landing at 5.39%, while the 5-year fixed rate fell by 0.10%, settling at 5.22%.

These may not seem like massive changes at first glance, but in the mortgage world, even small shifts can translate into significant savings over time.

What’s interesting is the narrowing gap between the 2- and 5-year fixed rates. The 2-year rate is currently only 0.17% higher than its 5-year counterpart – the smallest margin since January 2023. This could be a signal that lenders are adjusting their strategies in response to swap rate volatility and the recent drop in the Bank of England base rate.

Rachel Springall, Finance Expert at Moneyfacts, says such fierce competition in the aftermath of a typically subdued time of year “showed a mix of moves but led to the average shelf-life of a mortgage plummeting”.

Lenders tend to react quickly – often within a couple of weeks – to shifts in swap rates and base rates. The recent base rate cut has clearly rippled through the mortgage market, driving both rate reductions and increased competition among lenders.

MORE MORTGAGE OPTIONS

While rates are dropping, the speed at which deals come and go is accelerating. The average shelf-life of a mortgage deal now stands at just 16 days. This means borrowers have a much shorter window to secure a deal before it’s potentially replaced by a new one.

However, there’s some good news: mortgage product choice has expanded. There are now 6,684 products available – the highest number since February 2008. This gives borrowers more options but also reinforces the need to act fast.

For those with little equity or a small deposit, the landscape might be starting to shift in your favour.

The average 2-year fixed rate at 95% loan-to-value (LTV) saw its biggest month-on-month cut in six months, falling by 0.11%. This drop brings the rate further below 6%, offering a glimmer of hope for first-time buyers or those with limited deposits.

Also a raft of 5-year fixed deals at 95% LTV remain priced lower on average – by about 0.20%.

Springall points out that first-time buyers often exhaust most of their savings on a deposit, so finding not just a low rate but also a deal with cost-saving incentives is crucial.

And for those currently on a Standard Variable Rate (SVR), there’s an added incentive to remortgage.

The average SVR has dipped to 7.68%, the lowest since July 2023, but still far higher than fixed rates. If your fixed deal is ending soon, now might be the time to explore your options before rolling onto a pricier SVR.

With mortgage deals changing at breakneck speed, it’s more important than ever to stay informed and act decisively.

Rates are falling now but how long this trend will last remains uncertain. As always, the key is not to chase the lowest rate but to look for the best overall package – one that balances affordability with flexibility.

If you’re thinking about remortgaging or securing a new deal, remember, smart choices start with expert advice – speak to your mortgage adviser to get the best for your financial future.