This is according to Moneyfacts.co.uk, which revealed lenders were hiking their fixed rate deals at a faster pace than the Bank of England was raising its base rate.
Eleanor Williams, finance expert at Moneyfacts, said: “It is interesting to note that in the period between December 2021 and July 2022, base rate has risen from 0.10% to 1.25% – an increase of 1.15% in total.
“Over this same period, the average overall two-year fixed rate has risen by 1.40% to sit at 3.74%. The equivalent five-year fixed overall rate has gone up to 3.89%, a 1.25% rise when compared to the 2.64% this sat at in December 2021.”
Eleanor explained, the steep rise in rates, which will impact anyone who is about to remortgage to a fixed rate deal or who is applying for a mortgage for the first time or to move home, were being shaped by a range of influences.
“There are numerous factors which affect fixed rate pricing, rather than it simply tracking the Bank of England base rate,” she said.
“Providers take into account many influences, such as funding, swap rates, pricing pressures from other providers, and being able to maintain their service levels, among others.”
How high are mortgage rates at the moment?
The average rate on two and five-year fixed mortgages hit 3.74% and 3.89% respectively this month, said Moneyfacts.
To put this in context, this time last year – in July 2021 – the average rates were 2.55% on a two-year fixed rate and 2.78% on a five-year fix.
And last month, in June, the average rates were 3.25% and 3.37% respectively.
Moneyfacts said, both products had experienced the largest month-on-month rises on its records, which go back to 2007.
Meanwhile, the average interest rate on a standard variable rate (SVR) mortgage – which is the deal to which borrowers default once their deal has expired – has breached the 5% for the first time in more than 13 years.
In the last month the average SVR climbed by 0.15% to reach 5.06%. This compares to December 2021, just before the first of the recent base rate rises, when it was 4.40%.
This rise of 0.66% since December means SVR is now the highest Moneyfacts has recorded since January 2009 – just after the financial crisis.
| Mortgage market analysis | ||||||
| Jul-12 | Jul-17 | Jul-21 | Jun-22 | Jul-22 | ||
| Fixed and variable rate products | Total product count – all LTVs | 2,804 | 4,604 | 4,512 | 4,987 | 4,556 |
| All LTVs | Average two-year fixed rate | 4.61% | 2.26% | 2.55% | 3.25% | 3.74% |
| Average five-year fixed rate | 4.85% | 2.85% | 2.78% | 3.37% | 3.89% | |
| All LTVs | SVR | 4.83% | 4.60% | 4.41% | 4.91% | 5.06% |
| All LTVs | Average two-year tracker rate | 3.80% | 1.82% | 2.28% | 2.54% | 2.74% |
| Data shown is as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Reports | ||||||
What’s the advice for borrowers?
Eleanor added: “While we remain in a cost-of-living crisis, with pressure on many household budgets, it’s vital prospective borrowers explore their options and are not disheartened by recent rate rises.
“There are products in our top tables with even more competitive rates still available, and therefore some could possibly reduce their outgoings on their mortgage by even more.”
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