Mortgage rates up from record lows a year ago
This time last year, fixed rate mortgage rates were at an all-time low, with the average two-year fix sitting at 2.21%.
However, 12 months and two base rate rises later, the average has now risen to 2.49%, according to data from Moneyfacts.
The average three-year fixed rate mortgage has increased to 2.72% from 2.49% in October 2017, while five-year fixed products stand at 2.91%, up from 2.76%.
Finance expert at Moneyfacts, Charlotte Nelson, said: “The past year has been a challenging time for providers as they have had to wrestle with two base rate rises for the first time in years, while at the same time needing to remain competitive to protect their mortgage book.
“This conflict of interest has meant average fixed mortgage rates have not followed the Bank of England’s rate rises entirely. Despite this, borrowers opting for a two-year fixed rate mortgage today would still be £27.93 per month or £335.16 per year worse off compared to those who were lucky enough to lock into a fixed deal a year ago.”
However, things could be worse as rates have been falling since the August base rate rise.
The average two-year fixed mortgage rate stands at 2.49% today compared to a peak of 2.53% in August. Five-year fixed rates have also fallen by 0.02% over the same period.
Act fast to avoid disappointment
Nelson said: “The reduction of average 95% loan-to-value rates reported last week has some element to play in the overall averages decreasing. However, providers know that many borrowers are starting to think about protecting themselves from future rate rises, and a fixed mortgage does just that.
“Therefore, lenders are trying to remain competitive, wanting to be seen as offering some of the lowest rates in the market. With the summer now over, providers may also be starting to look at end of year targets, and are perhaps readjusting their rates to meet them.
“However, while rates may be falling now, it is unlikely that the record low levels seen in October 2017 will return anytime soon. 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 to avoid disappointment.”