Bitesize: How do fixed mortgage rates compare across loan-to-value ratios?

Alister Ratcliffe

Since 2012, long term rates have fallen and there have been various other policy packages to boost credit availability and lower borrowing costs.  But how have these fed through to different types of fixed mortgage rates?

The Bank is now publishing a 2 year fixed buy-to-let (BTL) quoted mortgage rate, for 75% loan-to-value ratio (LTV), as well as extra LTV breakdowns for owner-occupier (OO) mortgages, which help give us a picture.  How do rates compare between BTL and OO, and across LTVs?

Looking at the OO mortgage rates, we see that they have all fallen between January 2012 and the latest data.  But the higher LTV rates have fallen faster than the lower LTVs, leading to a compression in spread of rates offered.   The rate offered on 90% LTV mortgages has more than halved.  The difference between 60% LTV and 90% LTV has narrowed from 2.77 percentage points (pps) in January 2012 to 1.20pps in April 2017. And the gap between 60% and 75% OO LTV rates is now only 0.09pps. Similarly, the rate on 75% BTL mortgages has fallen, with the spread over the comparable OO mortgage narrowing as well.

2 year fixed quoted mortgage rates from January 2012 to February 2017

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Alister Ratcliffe works in the Bank’s Data and Statistics Division.

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