5-year mortgage rate rises – here’s how to beat it | moneyfacts.co.uk
MONEYFACTS ARCHIVE. This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Published: 09/03/2017

Years of mortgage rates continually falling to record lows means that borrowers have never had it better – they can get a low-cost mortgage deal and fix their repayments for years to come, with many seeking longer-term security for added peace of mind. However, figures show that the average mortgage rate has risen for the first time in 18 months, so if you're thinking of taking the plunge you may want to be quick about it.

Rate rise

Our figures show that the average five-year mortgage rate has risen for the first time since September 2015, with inflationary pressures and economic uncertainties beginning to take their toll. The average five-year fixed rate now stands at 2.93%, up from 2.91% in February, with the majority of loan-to-value (LTV) tiers seeing an uptick.

This was driven by the 95% LTV tier, which rose by 0.13%, with only the 90% and 65% LTV tiers noting a reduction (of 0.01% and 0.03% respectively). This pattern is mirrored in the two-year sector, as although the average remained unchanged at 2.33% this month, there are clear variations in LTVs. Again, the 95% LTV rate saw the sharpest rise, this time of 0.15%, so wider pressures are already having a keen impact.

More rises to come?

The fact that inflation is rising so rapidly is understandably having an impact on rates, particularly at higher LTVs, and yesterday's revelation that inflation is set to overshoot its 2% target – potentially hitting 2.4% this year, as announced in the Spring Budget
– is only going to exacerbate the issue.

Unfortunately, inflation doesn't just have an impact on savings rates – when it rises, discretionary incomes are also impacted, as the rising cost of living eats into people's budgets. Providers appear to be preparing for that (and the potential affordability issues that could follow) by raising rates, so unless competition returns to the foreground and overrides those concerns, there's the chance that the uptick in rates could continue.

How to get the best deal

Even if average rates do continue on their upward march, there's nothing to say that you can't still get a good deal, nor that you should overlook longer-term options. If anything, the possibility of higher rates means fixing for longer can be hugely cost-effective, as you can keep your repayments as low as possible for as long as you can to ensure any rate rises won't impact you. Not only that, but it's important to remember that the average rate is just that – an average – which means the market at large still has plenty of lower rate options!

Take a look at our mortgage Best Buys and see for yourself. The average five-year rate may be 2.93%, but if you've got a deposit of 35%, you can secure a rate that's as low as 1.99% with West Brom BS! Similarly, you can find a two-year deal with a rate of just 1.24% with HSBC, provided you've got a 25% deposit, even though the average is over 1% higher.

The message, then, is to save up as much as you can for a deposit, and once that's sorted, start comparing mortgages! A larger deposit invariably means a lower rate, but even if you've only got a limited budget, you can still secure some great first-time buyer deals if you take the time to look. Use our Best Buys to get started, and see if you can keep your repayments low over the long term, no matter what happens to the economy at large.


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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