Fixed rate mortgages rising at record pace: Moneyfacts

Both have experienced the largest month-on-month rises on Moneyfacts records, which go back to 2007.

The average two-year fixed rate has risen for a ninth consecutive month and, at 3.74%, has increased by 0.49% month-on-month. It is now 1.40% above where this rate sat in December 21 (2.34%), the highest Moneyfacts has recorded in over nine years (May 2013 – 3.80%).

At 3.89% the average five-year fix has also risen for nine successive months and is the highest on record since November 2014 (3.93%). Following the month-on-month rise of 0.52%, this rate is now 1.25% above the equivalent rate recorded in December 2021 (2.64%).

The average two-year tracker rate has climbed to 2.74% after an increase of 0.20% compared to last month and is now the highest recorded since June 2014 (2.75%). Since December 2021 this average rate has risen by 1.16%, which is broadly in line with the 1.15% base rate has gone up over this period.

The average SVR has breached 5% for the first time in more than 13 years. Having risen by 0.15% this month, it now sits at 5.06%. When compared to December 2021 (4.40%), prior to the first of the recent base rate rises, this has gone up by 0.66%. However, at 5.06%, this is now the highest recorded since January 2009 (5.14%).

Eleanor Williams, finance expert at Moneyfacts, said: “Product choice took another dip this month as mortgage lenders continue to revise their ranges in the face of ongoing economic uncertainty. We have seen some providers pull selected products, while others have withdrawn whole sectors of, or indeed their entire ranges, from the market temporarily. Compared to last month, total availability has reduced by a notable 431 deals to leave 4,556 mortgage products on offer to borrowers this month. This is just 44 more deals than were available this time last year, although at just 23 days the product shelf-life is seven days shorter than the 30 days this stood at in July 2021, reflecting the current pace of provider updates.

“As product ranges have condensed, average fixed rates have continued on an upwards trajectory, with two- and five-year fixed averages at all LTV tiers rising this month. The average overall two- and five-year fixed rates have increased by 0.49% and 0.52%, to sit at 3.74% and 3.89% respectively. These are the largest ever monthly rate rises recorded at Moneyfacts, on our data which tracks back to 2007.

“There are numerous factors which affect fixed rate pricing, rather than it simply tracking the Bank of England base rate. Providers take into account many influences, such as funding, swap rates, pricing pressures from other providers, and being able to maintain their service levels, among others. Having said that, it is interesting to note that in the period between December 2021 and July 2022, base rate has risen from 0.10% to 1.25% - an increase of 1.15% in total. Over this same period, the average overall two-year fixed rate has risen by 1.40% to sit at 3.74%. The equivalent five-year fixed overall rate has gone up to 3.89%, a 1.25% rise when compared to the 2.64% this sat at in December 2021.

“As might be expected following the recent base rate rises from the Bank of England, the average SVR has also risen and at 5.06% is now above 5% for the first time since January 2009. Although the difference between this rate and the average fixed rates has reduced in recent months, for eligible borrowers about to fall onto a revert rate, the incentive to lock into a new fixed deal is still clear. Those switching from the average SVR to the current average two-year fixed rate might be able to make monthly savings of nearly £150. While we remain in a cost of living crisis, with pressure on many household budgets, it’s vital prospective borrowers explore their options and are not disheartened by recent rate rises. There are products in our top tables with even more competitive rates still available, and therefore some could possibly reduce their outgoings on their mortgage by even more.”