Mortgage borrowers on their lender’s standard variable rate (SVR) or who are coming to the end of a fixed rate deal, may want to consider locking into a new fixed deal soon as the latest research by Moneyfacts.co.uk has found that since July 2020 average rates have been rising.
Back in July the average rate on a fixed deal was at historic lows, with the average rates on deals with a fee standing at 2.29% and without a fee at 2.28%. Since then average rates have been rising and now stand at 2.54% on deals with a fee and 2.61% on deals without a fee. This is an increase of 0.25% and 0.33% respectively in less than two months.
Saying this, as the below chart shows, average mortgage rates are lower than they were at the beginning of March. Eleanor Williams, finance expert at Moneyfacts.co.uk, explained: “On average, fixed rate mortgage deals remain lower today than they were at the beginning of March this year, with deals for all loan-to-value (LTV) fixed rate products that carry a fee currently 2.54%, and for those deals without a fee slightly higher at 2.61%. However, these rates have increased since the start of July, by 0.25% and 0.33% respectively, and with no guarantee these will not increase further, some borrowers may be spurred into exploring their options now. Compared to the average standard variable rate (SVR), which is 4.44% currently, borrowers who switch from a revert rate to a new fixed deal now could potentially save in the region of £150* per month on their mortgage payments.”
|Average fixed mortgage rate|
|Average rate (deals with fee)||2.89%||2.93%||2.71%||2.43%||2.29%||2.42%||2.54%|
|Average rate (deals with no fee)||2.80%||2.80%||2.38%||2.32%||2.28%||2.34%||2.61%|
Data shown is as at the first available day of the month, unless stated otherwise
Although rate is important when choosing a mortgage, the true cost of the deal will take into account a range of factors including the product fee and incentives. As such, we have researched how product fees and incentives have changed over the last six months.
|Fixed rate deals product fees and incentives|
|Average product fee (excluding deals with no fee)||£1,040||£1,028||£1,024||£1,018||£1,042||£1,059||£1,066|
|Deals with no product fee||1,780 (40%)||1,100 (40%)||873 (40%)||959 (40%)||896 (39%)||868 (41%)||806 (40%)|
|Deals with free/refunded legal fees||2,157 (49%)||1,456 (53%)||1,218 (55%)||1,252 (52%)||1,250 (55%)||1,226 (58%)||1,154 (57%)|
|Deals with a free/refunded valuation||3,145 (71%)||1,873 (68%)||1,630 (74%)||1,863 (78%)||1,755 (77%)||1,575 (74%)||1,439 (71%)|
|Deals with cashback||1,377 (31%)||884 (32%)||737 (33%)||781 (33%)||735 (32%)||646 (31%)||543 (27%)|
As the above chart shows, our research has found that the average product fee on fixed deals (excluding deals with no fee) has increased from £1,040 in March to £1,066 on 24 August. The most significant rise has been between June and 24 August, when it increased by £48, from a low of £1,018.
While the product fee has increased since March, the percentage of deals without a product fee has remained stable at 40%. This is despite the overall number of deals without a fee falling from 1,780 in March to 806 on 24 August, but this fall is due to lenders withdrawing deals across the market during the last six months.
Borrowers looking for a deal with a cashback offer will be disappointed to see that the percentage of deals offering cashback as an incentive has fallen from 31% in March to 27% on 24 August, with the number of products offering cashback falling from 1,377 to 543 during this period.
It wasn’t all bad news for borrowers, as the percentage of deals offering no or refunded legal fees has increased from 49% in March to 57% on 24 August. Meanwhile, the number of deals with free or refunded valuations has remained stable at 71%. Williams added: “While it is positive to see stability in mortgage incentives, they are likely to only cover the essentials as free valuations tend to be basic and free legal fees usually only cover standard conveyancing. Deciding on the right mortgage deal is about more than just the initial rate offered, but with rates rising and the stamp duty holiday set to finish at the end of March 2021, borrowers may wish to act swiftly as demand could spike and application processing times could extend. Seeking independent financial advice would be wise to ensure that the best possible deal for a borrower’s circumstances is considered based on the overall lifetime cost of the mortgage package.”
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.