New data released today shows the average two-year fixed rate mortgage dipped in price between the start of April and the beginning of May from 5.35% to 5.26%
Meanwhile, those taking out a five-year fixed rate deal will see rates have fallen from 5.05% to 4.97% during the same time, according to Moneyfacts.co.uk.
In more good news, the number of mortgages being offered to the market has also increased to 5,264 – a level not seen since February 2022, long before the mortgage crisis which saw lenders pull swathes of products.
Moneyfacts said this all suggested more stability across the mortgage market, but the data comes just days after the Bank of England (BoE) hiked the base rate to 4.5%.
Rachel Springall, finance expert at Moneyfacts, said: “Promising as these signs may be, it is anticipated fixed interest rates will start to rise due to volatile swap rates, and for the eighth month running, the average five-year fixed mortgage rate rests lower than the two-year equivalent.
“Borrowers who are coming off a fixed rate deal may be understandably concerned about the rate difference between their existing rate and those on offer in the present market. In May 2021, the average two-year fixed mortgage rate stood at 2.57%, it is now more than double that.
“Those on a longer-term fixed mortgage may note the average five-year fixed mortgage rate in May 2018 stood at 2.91% but is now over 2% higher.”
Variable and tracker rates climbing
Borrowers on variable and tracker mortgages, however, will see their rates have increased – as would be expected following BoE rate rises.
The average two-year tracker mortgage rate rose between the start of April and beginning of May from 5.02% to 5.07%.
Meanwhile, Moneyfacts revealed, the average ‘revert to’ rate or Standard Variable Rate (SVR) continued to climb and is now at 7.37%, – the highest level since December 2007.
Borrowers due to remortgage from a fixed-rate deal who are worried about higher interest rates may be considering using their SVR as an interim measure until interest rates start coming down.
But Springall advised they think carefully about this option. “Borrowers debating whether to fix or stay would be wise to seek advice to help them find the right option that suits their individual circumstances.
“As our average Standard Variable Rate (SVR) rests at 7.37%, its highest rate since 2007, those sitting on a revert rate could reduce their monthly repayments by switching to a fixed rate.
“However, it is vital borrowers assess the overall package of any deal before they commit and be comfortable that it is an appropriate time to refinance.”
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