Mortgage News

Homeowners looking to lock into a fixed rate mortgage deal are being urged to act quickly as the rates on fixed deals have risen sharply in the last month.

In fact, during August the average two year fixed rate rose by 0.16%, from 2.08% on 1 August to 2.24% on 1 September, its largest increase since July 2009. Meanwhile, the average rate on five year fixed deals increased by 0.15%, from 2.34% on 1 August to 2.49% on 1 September – its biggest rise since March 2011. As the below chart shows, average fixed rates have been rising since July, when they reached historic lows of 1.99% on two year fixed deals and 2.25% on five year fixed deals.

Average rates shown are as at the first available day of the month, unless stated otherwise. Source: Moneyfacts Treasury Report

Commenting on the rate rises, Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “While these rates are still some 0.19% and 0.25% lower than prior to lockdown, the level of increases seem to have gathered pace, doubling over the last two months. If these were to carry on their current trajectory, within the next couple of months, consumers could face average rates in excess of those available prior to the onset of the pandemic.”

Mortgage rates saw some further changes this week as some lenders pulled or increased their rates. Leeds Building Society increased their mortgage rates this week and Platform, a part of the Co-operative Bank withdrew some of their fixed rate mortgages.

The best mortgage rates are shown below for those wanting to remortgage, move home and for first-time buyers. Our tables list the best deals available directly from the lender that are available across Great Britain. All the rates shown are for those mortgages available at 60% LTV unless otherwise stated.

The latest Nationwide House Price Index found that during August, the average house price had risen to £224,123, up by 2.0% from the previous month. This, combined with lenders withdrawing high loan-to-value (LTV) mortgage deals from the market as well as historic low saving rates, has made it even more challenging for first-time buyers to save the deposit needed for their first home.

Although the property market could start to slow towards the end of this year and into 2021, when the economic impact of the pandemic becomes clearer, first-time buyers are still having to save hefty deposits in order to buy their first home. In fact, the current average deposit needed to buy a first home is £47,059, which is a 25% increase from 10 years ago when the average was £37,761.

Many first-time buyers have resorted to getting help from parents to boost the deposit they need to buy their first home. But, as lenders have become increasingly reluctant to lend to first-time buyers, relying on parents for deposits is not always an option. For example, last month Nationwide stated that to get a 90% LTV deal, first-time buyers had to prove they had saved 75% of the deposit themselves.

Those wanting to take advantage of the current stamp duty holiday to buy a new home or a buy-to-let investment will find that the number of mortgages approved is now back to levels seen before the Coronavirus lockdown. Data from the Bank of England shows that the number of house purchase mortgages approved in July 2020 was 66,281 an increase of 66% on the approvals in June 2020 and only 1% behind July 2019. However, those needing a mortgage at 90% loan-to-value (LTV) or above will struggle, as lenders have pulled many of the mortgages available at this tier and increased rates.