Borrowers have been enjoying low rates for some time now, but this could be coming to an end as the average two-year fixed rate mortgage rose for over two thirds of April.
Research from Moneyfacts reveals that the average rate charged on a two-year fixed rate mortgage, across all loan-to values, increased by 0.09% in one month - the largest increase in the average rate since February 2012 when it rose by 0.13%.
Increases were seen on fourteen (70%) of the twenty business days in April and decreases on just three days (15%). This means anyone applying for a two-year fixed rate mortgage on 1 April would have been offered an average rate of 3.52%, but by 30 April it would have risen to 3.61%, or an additional £290.88 over the term for a mortgage of £250,000.
Sylvia Waycot, Editor at Moneyfacts, said:
"The two-year fixed rate mortgage has been the favoured option for the risk-averse borrower who enjoys the knowledge that they know what their mortgage will cost each month. However, as these deals have come to an end, many borrowers have reverted to the variable rate of their lender, as in many cases it has proved a cheaper alternative.
"However, the average two-year fixed rate increased fourteen of the twenty business days in April and the average five-year fixed rates have fared no better, increasing 15 out of 20 working days in April.
"Don't make the mistake of thinking that we need a change to base rate to increase the cost of mortgages, as prices are creeping upwards now. So if fixed rates are your preference, now is the time to fix."
Despite the increases, rates are still very low in the current market, and many people have become used to levels that are not generally the norm. The question on everyone's lips is when are rates going to rise and although no one without a crystal ball can answer this question, it is inevitable that they will in the relatively near future.
If you have a mortgage, you need to work out if you can afford to pay it at a higher level of interest. Calculate what your repayments would be if rates went up 1%, 3% and then see if you could still manage it if they rose by as much as 5%.
Getting the decision right on whether to fix or use your lender's standard variable rate can make the difference between hundreds of pounds a month, so think carefully.
A fixed rate will probably cost more than a variable rate initially but it will offer you a level of security if rates do rise, so if your current lifestyle requires a level of certainty then perhaps a fixed deal is for you.
A standard variable rate is often cheaper than a fixed deal but you need to be satisfied that you can meet payments if rates go up. Don't simply choose a mortgage because it is the cheapest, think about the future too.
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