Compared to this time last year, when the mortgage market was enjoying record low mortgage rates, two base rate rises have ensured that these competitive interest deals are now once again a thing of the past. With rates having generally edged upwards ever since, borrowers must once again be vigilant when looking for a new mortgage deal.
"October 2017 will be known not only as the month of the lowest fixed mortgage rates on Moneyfacts' records, but also as the turning point in the market," Moneyfacts.co.uk finance expert Charlotte Nelson commented. "That is because just one month later, mortgage rates were on the rise, as was the Bank of England base rate for the first time since July 2007."
|Two-year fixed mortgage rate||2.21%||2.43%||2.49%|
|Three-year fixed mortgage rate||2.49%||2.61%||2.72%|
|Five-year fixed mortgage rate||2.76%||2.91%||2.91%|
As you can see, all fixed rate averages have gone up as providers wrestled with two base rate rises – one in November 2017 and one in August 2018. While they were forced to increase rates as the cost of borrowing increased, they wanted to remain competitive at the same time, to protect their mortgage book.
This conflict has resulted in providers following the Bank of England's rate rises only partially, with data from Moneyfacts.co.uk showing that "the average two-year fixed mortgage rate has risen by just 0.28% in the last 12 months, instead of the full 0.50% base rate increase," as reported by Charlotte.
"Despite this, borrowers opting for a two-year fixed rate mortgage today would still be £335.16 per year worse off compared to those who were lucky enough to lock into a fixed deal a year ago [based on the average rates on a £200,000 mortgage over a 25-year term on a repayment basis]." Since this is an average, customers still have a chance of obtaining more competitive rates, but they'll have to keep a weather eye on the mortgage Best Buys.
Additionally, it could be worse. "Since the August rate rise, many would have expected rates to increase further, but instead they are actually falling, with the average two-year fixed mortgage rate standing at 2.49% today compared to 2.53% in August," said Charlotte. "Five-year fixed rates have also fallen by 0.02% over the same period."
We already reported last week that first-time buyers can currently enjoy record low 95% loan-to-value (LTV) mortgage rates, which is certainly helping to reduce the overall increase in rates. But these aren't the only borrowers that could benefit from fixing their mortgage now, as rates are likely to continue increasing.
"Providers know that many borrowers are starting to think about protecting themselves from future rate rises, and a fixed mortgage does just that," Charlotte concluded. "It is unlikely that the record low levels seen in October 2017 will return anytime soon, [and] with multiple base rate rises predicted for the foreseeable future, it is likely rates will only get higher, so borrowers looking for a fixed deal should act fast avoid disappointment."
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.