Bank Of England Rate Hike Affects Mortgage Deals | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.


Eleanor Williams

Finance Expert & Press Officer
Published: 10/01/2022
stacks of coins representing mortgage prices

The Bank of England’s surprise December interest rate increase has begun to filter through to the mortgage market, pushing up the cost of both fixed and variable rate deals.

The findings are revealed in the January Moneyfacts UK Mortgage Trends Treasury Report, which shows that two-year and five-year fixed rate mortgages have become more expensive for the third month in a row. The cost of an average two-year fixed deal rose to 2.38% in January, up from 2.34% in December. The average five-year fix has increased from 2.64% to 2.66% month-on-month.

Looking at variable-rate products, the overall average rate for term tracker mortgages has risen in line with the base rate hike, going up by 0.15% to 3.53%. The average two-year tracker rate has increased to 1.75%, although this is actually 0.62% lower than it was this time last year.

The average Standard Variable Rate (the default tariff you’ll be moved to if you don’t remortgage when your fixed term deal comes to an end) is 4.41%, a slight increase from December.

Rates have gone up across most loan-to-value (LTV) tiers, although one bucked the trend – average rates on two- and five-year fixed mortgage deals at 95% LTV (meaning those buyers with just a 5% deposit) fell for the ninth consecutive month to hit record lows of 3.06% and 3.33% respectively.

Product choice hits 13-year high

Mortgage availability as a whole has continued to improve, the data shows, with 5,394 fixed and variable rate mortgage products included in this month’s research, up from 5,315 in December 2021. This is the highest level of total product choice seen in the past 13 years.

While the only way is up for interest rates from here after the Bank of England raised rates from 0.1% to 0.25% in December, there are still opportunities for homeowners to get a better deal. Locking in a fixed rate now can still make you big savings compared to the average lender’s standard variable rate, noted Eleanor Williams, finance expert at

“With the potential for the Bank of England to apply further increases to the base rate in the coming months, there is no guarantee that the cost of borrowing on mortgages will not continue to rise overall,” she said. “As the threat of rising inflation and potential for the cost of living to continue to rise and squeeze household budgets even more, there may be borrowers prompted to act sooner than perhaps they might have planned to in considering securing a new mortgage deal.”

Those with the smallest deposits could benefit from falling rates as lenders scramble to attract first-time buyers, she added. “Borrowers with a 5% deposit or equity may be very pleased to note that the average two- and five-year fixed rates have fallen even further to reach another record low this month. In fact, the average two-year rate at 95% LTV is currently 1.38% less than the 4.44% that borrowers searching for an equivalent deal this time last year would have faced.” With the number of first-time buyers at a 20-year high, this could be a space in which mortgage lenders will continue competing fiercely for business, she suggested.



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