Borrowers on their lender's default mortgage are being urged to switch to a cheaper deal as new data reveals record increases in interest rates since December.
Borrowers looking to secure a deal on a two-year tracker will be paying rates which are, on average, 0.45% higher than they were in December 2021.
Meanwhile the average standard variable rate (SVR), which is the rate onto which your mortgage defaults when you finish your deal, has increased by 0.15% to 4.61%, according to Moneyfacts.co.uk. It said this was the largest single monthly rise on its records.
These rises have come about in response to the Bank of England increasing its base rate by 0.15% in December and then again by 0.25% in February to reach 0.5%.
And while fixed-rates have also started to climb in response to the hikes, experts are advising they are still the safer option for anyone on a variable rate.
In fact Moneyfacts said, for anyone on an SVR there was now a very strong incentive to switch because the average overall two-year fixed rate remained 1.96% below the average SVR.
Eleanor Williams, finance expert at Moneyfacts, said: “Borrowers contemplating securing a new mortgage deal may be disheartened to see that rates are continuing to rise this month.
“Fuelled by uplift across LTV tiers, the overall average two- and five-year fixed rates have both continued their climb.”
She added: “However, those coming off a maturing five-year fixed deal from 2017 may be able to secure a competitive deal as the average rate remains 0.05% below where it sat in March 2017 (2.93%).”
Product choice
Moneyfacts also revealed there were fewer products from which borrowers could chose with 518 deals being shelved this month.
Eleanor said: “This is the biggest monthly drop in mortgage availability since May 2020 (626) during the mass product withdrawals recorded in the early stages of the pandemic and leaves borrowers with 384 products fewer than were on offer in March 2020 (5,222).
“As well as selected product withdrawals, we have seen providers revamp their product ranges with a number pulling whole LTV brackets and in one case temporarily withdrawing their entire range.”
As always, the advice for anyone who wants to try and save money but is not sure of the best deal is to speak to an adviser.
Eleanor added: “While factors beyond lenders’ control are uncertain, as the cost of living crisis continues and economic conditions are volatile, to mitigate the risk of default, it could be that providers may tighten their lending belts even further moving forwards.
“Borrowers looking to get onto the property ladder or to remortgage may therefore be wise to seek advice to ensure they are abreast of the changing market and to move forwards with securing the most suitable deal for them.”
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