The average price of a fixed rate mortgage has increased to more than 3% for the first time in over seven years, according to the latest data from Moneyfacts.co.uk.
Borrowers poised to take out a fixed rate deal will feel the impact of this significant leap, which comes following four consecutive Bank of England base rate rises.
The analysis out today revealed the average two-year fixed rate mortgage now has an interest rate of 3.03%. This is the highest Moneyfacts has recorded since March 2015 and is 0.69% more than the average rate in December 2021.
For those borrowers taking out a five-year deal, average rates are now at 3.17% – this is a 0.53% leap since December.
For home buyers with a 5% deposit the average rates for two-year and five-year fixed rates have also increased to 3.35% and 3.47% respectively. However, this is still lower than a year ago and, said Moneyfacts, product availability had improved.
The increase in fixed-rates will only impact those taking out new fixed rate deals. Borrowers who have already secured a deal won’t see any change in their rate until their mortgage expires and they remortgage.
How mortgage rate hikes impact homeowners remortgaging?
If you are remortgaging, the increase in house prices during the last year may mean you can secure yourself a decent rate anyway.
Eleanor Williams, finance expert at Moneyfacts, said the recent Bank of England base rate rises could well encourage more remortgagers to hurry and secure some financial stability by locking into a fixed deal.
“This move may particularly be true for those who, by virtue of house price growth, could take advantage of increased equity in their home to potentially secure a lower rate,” she said.
How will first-time buyers be affected by mortgage rate rises?
Eleanor said first-time buyers may well, and quite understandably, be feeling disheartened by the combination of rising house prices, mortgage rates surging and increases in their cost of living impacting on affordability.
However, she added: “They may therefore take a small glimmer of hope from the fact that, at 369 deals, the provision of products offered at 95% loan-to-value (LTV) is at its highest since pre-pandemic March 2020 (391).
“The average two- and five-year fixed rates at both 95% and 90% LTV may have risen month-on-month, these are the only two lending tiers where the average rates remain lower now than they were at this time last year.
“While there may be some who are forced to delay their homeownership dreams due to wider economic pressures, recent movements in this sector seem to indicate that lenders could be keen to continue to cater to this demographic where possible.”
| Mortgage market analysis (Source: Moneyfacts.co.uk) | |||||
| May-17 | May-21 | Apr-22 | May-22 | ||
| Fixed and variable rate products | Total product count – all LTVs | 4,460 | 3,927 | 4,925 | 5,087 |
| Product count – 95% LTV | 257 | 112 | 367 | 369 | |
| All LTVs | Average two-year fixed rate | 2.30% | 2.57% | 2.86% | 3.03% |
| Average five-year fixed rate | 2.89% | 2.79% | 3.01% | 3.17% | |
| 95% LTV | Average two-year fixed rate | 4.19% | 4.02% | 3.19% | 3.35% |
| Average five-year fixed rate | 4.54% | 4.17% | 3.37% | 3.47% | |
| All products | Shelf-Life (days) | 21 | 32 | 21 | 22 |
| Data shown is as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Reports | |||||
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