Mortgage rates have already started creeping up just weeks after the Bank of England (BoE) hiked its base rate to 0.25%.
It’s not just tracker rates, which mimic the BoE’s interest rates, which have climbed. Indeed, lenders are also increasing the prices on fixed-rate mortgage deals too.
Information released today by Moneyfacts.co.uk revealed the rate of the average term tracker products – which follow base rate ups and downs for the lifetime of the mortgage – increased in line with the BoE 0.15% increase to rise to 3.53%.
For those on two-year tracker mortgages your rate will have increased by an average of 0.17% to 1.75%. Although this hike is higher than the BoE increase, Moneyfacts pointed it out it’s still lower than the same rate a year.
Meanwhile lenders have also been continuing to inflate the rates on their fixed mortgages. Moneyfacts said the average two-year fixed had seen a 0.04% month-on-month rise and now stood at 2.38%. The typical five-year equivalent went up 0.02% to 2.66%.
It’s the third consecutive month the overall average fixed rates have gone up. Lenders began hiking these in autumn when speculation of a BoE rise emerged.
Standard variable rate mortgages have remained nearly the same, however, going up one notch from 4.40% to 4.41%.
However, Eleanor Williams, finance expert at Moneyfacts, warned borrowers on their SVR not to get complacent.
“There may well be further increases to SVRs over the coming months,” she said, “but the potential to save by switching from a variable revert rate to a fixed rate mortgage is clear, as the difference between the average two-year fixed rate and average SVR remains over 2%.”
One good piece of news for borrowers is product choice was strong – in fact Eleanor said borrowers had the pick of the highest number of mortgages in 13 years.
High-LTV borrowers
And first-time buyers with 5% deposits were also in a slightly more favourable position as 95% loan-to-value (LTV) fixed-rate mortgages had experienced a dip in prices.
Eleanor said: “The average two-year rate at 95% LTV is currently 1.38% less than the 4.44% that borrowers searching for an equivalent deal this time last year would have faced.”
She added: “Following the end of the Stamp Duty holiday, it may be that this is a sector in which lenders are keen to continue competing for business, supported by the mortgage guarantee scheme which is set to run until the end of this year, and regardless of changes to base rate.”
More hikes to follow…
Eleanor warned borrowers to be on their guard for further rate rises. She added: “With the potential for the Bank of England to apply further increases to the base rate in the coming months, there is no guarantee that the cost of borrowing on mortgages will not continue to rise overall.
“As the threat of rising inflation and potential for the cost of living to continue to rise and squeeze household budgets even more, there may be borrowers prompted to act sooner than perhaps they might have planned to in considering securing a new mortgage deal.”
| Mortgage market analysis | ||||||
| Jan-17 | Jan-20 | Jan-21 | Dec-21 | Jan-22 | ||
| Fixed and variable rate products | Total product count – all LTVs | 4,096 | 4,969 | 2,893 | 5,315 | 5,394 |
| All LTVs | Average two-year fixed rate | 2.31% | 2.44% | 2.52% | 2.34% | 2.38% |
| Average five-year fixed rate | 2.92% | 2.74% | 2.71% | 2.64% | 2.66% | |
| Average two-year tracker rate | 1.98% | 2.00% | 2.37% | 1.58% | 1.75% | |
| Average term tracker rate | 2.65% | 3.72% | 2.75% | 3.38% | 3.53% | |
| Standard Variable Rate (SVR) | 4.56% | 4.90% | 4.41% | 4.40% | 4.41% | |
| 95% LTV | Average two-year fixed rate | 3.89% | 3.25% | 4.44% | 3.09% | 3.06% |
| Average five-year fixed rate | 4.37% | 3.56% | 3.62% | 3.39% | 3.33% | |
| Data shown is as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Reports | ||||||
