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ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.


Lieke Braadbaart

Online Writer
Published: 08/05/2018

The upcoming Moneyfacts UK Mortgage Trends Treasury Report reveals that the mortgage market has started to grind to a halt as Thursday's highly anticipated base rate announcement draws near. Yet despite this, the average two-year fixed rate has gone up again.

"The average two-year fixed mortgage rate has increased rapidly this month, jumping 0.08% to stand at 2.51%," reports Charlotte Nelson, finance expert at Moneyfacts. This marks the largest increase to this rate since November, which may not seem like a long time ago but stands out as the month wherein base rate last increased. What's more, it's also the highest average seen since July 2016.

And this isn't the only sign that another base rate rise may be on the cards. "At the beginning of the month, all key indicators such as SWAP rates and LIBOR were showing signs that the base rate was likely to rise on 10 May," Charlotte says. "With the money markets already pricing in this increase, providers had little choice but to follow suit and do the same with their [two-year] fixed rates."

However, Bank of England Governor Mark Carney's recent speech, wherein he stated that uncertainty over the UK leaving the EU could delay a rate rise, may have thrown a spanner in the works. According to Charlotte, the speech, "coupled with lower than expected inflation, slow manufacturing growth, a fall in the pound and a slowdown in consumer borrowing, has caused the LIBOR and SWAP rate markets to fall in recent weeks."

As a result, the two-year SWAP rate is now almost back to where it was in March, after falling by 0.07% to 1.04% over the last month. Providers have been a bit slower to respond, unsure of what is going to happen next, and have largely chosen to keep their product range as is for the time being. Indeed, the five-year fixed mortgage rate has remained unchanged this month at 2.91%, unlike its two-year counterpart.

Charlotte suggests that "this has arguably been driven by greater competition. With more borrowers considering long-term fixed rates as an option to protect themselves from future rate rises, providers have opted to remain competitive to attract these borrowers to their mortgage book."

If you haven't considered this yourself yet, now may be a great time to do so. Especially those who are sitting on their lender's standard variable rate or coming to the end of a deal soon may want to consider remortgaging.


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