Borrowers, we've got some bad news – the run of record low mortgage rates has officially come to an end. Our latest research shows that after more than a year of continual rate cuts, the average two and five-year fixed rates have increased for the first time in 13 months, so if you want to benefit from a truly low-cost mortgage, you need to act fast!
Our figures show that the average two-year fixed mortgage rate rose by 0.04% this month, up from 2.68% in August to stand at 2.72% today, the first time an increase has been recorded since August last year. During that month the rate rose from 3.52% to 3.54%, where it remained in September 2014, before posting consecutive monthly falls until today.
There are still slight variations when looking at different loan-to-values (LTVs), with rates at the lower end of the LTV scale posting larger increases, continuing the trend recorded last month. Meanwhile, those with small deposits could still reap the rewards of falling rates, with the average rate for a two-year 95% LTV mortgage falling by 0.06% to 3.35%. However, this was the only tier to see a reduction this month, so the general trend is clear.
This pattern is mirrored in the five-year sector, with the average five-year mortgage rate also increasing this month to stand at 3.28%. Interestingly, this not only marks the same 0.04% rise on a monthly basis (up from 3.24% in August), but also the first increase in 13 months, following the pattern of the two-year rate. The last increase in the five-year sector was again recorded in August 2014, when it rose from 4.20% to 4.22%, and as in the two-year sector, it's fallen ever since. Until now, that is.
Well, by the looks of things, it's all because of ongoing speculation over base rate, which has given mortgage lenders no option but to start increasing rates. This is because providers have been cutting their rates so dramatically over the last year, essentially sacrificing risk in order to lower rates and attract borrowers, that they now have little margin with which to absorb any rise in wholesale costs.
As a result, any hint of an increase to costs – which will be the inevitable outcome of a rise to base rate – will mean that their mortgage rates will rise accordingly, and even though base rate may stay at its current level well into next year, providers seem to be preparing for the increase already.
Make your move
This all means that, in all likelihood, average rates reached their final low point last month, and there's no expectation of them falling below that level in the near-future. Instead, they're largely expected to continue rising, so if you want to make the most of the low-rate environment before it's too late, it's time to make your move!
Despite the slight increase this month, mortgage rates are still incredibly low, and if you opt for a fixed rate deal you'll be able to secure that rate for several years to come – no matter what happens to base rate in that time. It can be a great way to keep your budget in check as you'll be able to enjoy low repayments for the long term, so check out our best buys to find the deal for you – after all, they won't be around forever!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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