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Mortgage rates dropping again

By Matthew Plant

26 November2021

Mortgage rates are dropping again - and the improvements we've seen in the mortgage market recently are expected to continue, the Council of Mortgage Lenders (CML) reports.

The latest estimate indicates that gross mortgage lending bumped back up to the 12.9 billion mark in October. Coming after a sharp dip in September, this shows that lending's at an 11-month high - and around 4% higher than it was in October last year.

So it seems the Funding for Lending Scheme is having an 'early positive impact', while mortgage lenders are generally finding it easier to get funding around Europe.

And it's not just people with big deposits who are benefiting: we've seen greater competition among 'high-LTV products' (mortgages with a high Loan-to-Value ratio - for people who need to borrow almost as much as the property is worth).

New mortgages

Would-be homeowners in particular will be pleased to hear that mortgage rates are coming down again:

  • Early last year, the average quoted rate on a five-year fixed-rate mortgage was over 5%
  • By September 2011, it was down around 4%
  • By June, it was back up to around 4.3%
  • Just last month, in October, it was below 4%.

Two-year fixed-rate mortgages have followed the same kind of pattern. They started last year around 3.7%, then dropped below 3% by last September. After slowly rising back to 3.7%, they're now starting to fall again.

Fact: Fixed-rate mortgages account for around two thirds of new mortgage lending these days.


There's not been a lot of remortgaging throughout 2021. A lot of people have just chosen to revert to the lender's SVR (Standard Variable Rate) at the end of a fixed term.

That's changed a bit in recent months, partly because some lenders have increased their SVRs - and partly because the new mortgages out there are becoming more attractive.

"House purchase and remortgage activity both appear to have picked up recently," commented CML chief economist Bob Pannell on 20th November, "and this should be supported by an improvement in the availability and pricing of mortgages."

He continued: "The Funding for Lending Scheme is likely to have made an early positive impact, helping to counter some of the negative pressures associated with a protracted and weak economic recovery."

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