Borrowers coming off five-year fixes face monthly payment hikes of £380: Moneyfacts

Since 9th March, over 1,700 mortgage products have been withdrawn, with the Moneyfacts average mortgage rate rising from 4.91% to 5.50%.

The average two-year fixed rate has risen from 4.85% to 5.56% and the average five-year fix is up from 4.97% to 5.54%.

Current swap rate levels indicate that lenders are prepared for several base rate hikes. Borrowers on trackers will quickly feel the force and even a 0.25% jump could push the average two-year tracker from 4.55% to 4.80%, adding almost £430 a year onto a typical £250,000 loan over 25 years.

Borrowers coming off low five-year fixed rates should also expect higher-than-expected costs. Locking into another five-year term could increase their monthly payments by over £380 based on a typical loan. 

Caitlyn Eastell, personal finance analyst at Moneyfactscompare, said: “The outlook for interest rates has changed drastically over the past few weeks, spurred by unstable swap rates caused by the conflict in the Middle East. As a result, the mortgage market has been extremely volatile and over 1,700 products have been withdrawn since 9th March. While some of these deals have come back, they are at higher rates and it could be fair to assume many lenders may be taking this path, which could drive average rates up further. Currently, lenders are expecting several base rate hikes, which may be demoralising for borrowers. Even just one 0.25% hike could push mortgage rates higher, but borrowers on trackers will quickly feel the force of these rises. Currently the average two-year tracker is 4.55% and a small jump could take this to around 4.80%, adding almost £430 a year onto their loan.

“Around 1.8 million borrowers are expected to refinance this year; this includes those coming off low five-year fixed rates. Homeowners should prepare themselves for higher-than-expected costs, if they lock into another five-year term, they could see their monthly repayments spike by over £380. Borrowers have the option of securing a new deal typically up to six months before their current rate expires, this may be crucial for those who are concerned about rising costs. This also avoids borrowers slipping onto their revert rate, which would add over £630 per month on average, an amount that many may not be able to afford.”