There has been a ‘sizeable’ increase in rates offered on two-year fixed-rate mortgages since the beginning of the year, the latest data from Moneyfacts has revealed.
The research has been unveiled as borrowers consider how the recent decision by the Bank of England to increase the base rate to 0.75% will affect their mortgage options.
And it also comes as analysis by Experian revealed a rise in the number of people searching for fixed-rate deals in July in the lead up to the interest rate rise.
Moneyfacts discovered that while the average two-year fixed-rate mortgage increased by a tiny 0.01% in August to 2.53%, the figure was 0.18% lower back in January.
It said this ‘sizeable’ increase showed lenders had clearly predicted a rate rise was on the horizon since the start of the year.
“As a result,” said Charlotte Nelson, finance expert for Moneyfacts, “by the August announcement, 72% of mortgage rates had already factored the 0.25% rate rise into their two-year fixed mortgage rates during the first half of the year.”
Meanwhile, tracker rates were also creeping up in the approach to the August interest rate announcement. Nelson explained: “This is should be a stark warning to borrowers as mortgage rates have been on the rise without the need of a base rate increase by the Bank of England.
“Any borrower sitting on their standard variable rate or coming to the end of a deal should remortgage as soon as possible to ensure they get the most cost-effective product possible.”
Experian’s figures revealed a third of searches on its comparison service were for fixed-term deals in July, up from 24% in May.
It said, this trend suggested potential homeowners were looking to tie themselves into a fixed deal to protect themselves from an increase in interest rates and mortgage payments.
Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “The rise in those looking at fixed-term mortgages indicates people have been reacting to the speculation of a potential rate rise.
“If and when there are further rises is yet to be seen, but in the meantime a priority for homeowners should be to take some simple steps to plan ahead.”
