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Fixed mortgage rate increases gather momentum

Fixed mortgage rate increases gather momentum
Anna Sagar
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Anna Sagar

Average two- and five-year fixed rate rises have gained pace, with May rising by 0.11% and 0.09% month-on-month respectively, a report has found.

This is the biggest fixed rate month-on-month jump since March 2024, according to Moneyfacts’ UK Mortgage Trends Treasury Report. However, these rates are lower compared to January 2024.

The average two-year fixed rate stands at 5.91%, and the average five-year fixed rate is priced at 5.48%. The 0.43% gap between the two is the largest difference in six months.

The average standard variable rate (SVR) stayed stable at 8.18%, which is lower than the high of 8.19% during November and December 2023, according to the report’s findings.

The average two-year tracker variable mortgage decreased to 6.12% from 6.14% in April 2024. However, this is up from 5.07% in May last year.

The total number of products in May came to 6,565, which is an increase from 6,307 in the prior month and 5,264 in May last year.

Moneyfacts said that the availability of deals at the 90% loan-to-value (LTV) tier rose for a third consecutive month to 79 deals, which is the highest point in over 16 years.

The number of deals at 95% LTV rose for a fifth consecutive month to 347 products and is the highest count in almost two years.

The shelf life of products had also improved to 28 days, which is a rise from 22 days in April and 25 days in May 2023.

Fixed rate rises balanced by stabilising product availability

Rachel Springall, finance expert at Moneyfacts, said that the gathering momentum of mortgage rate rises “counters the more subdued rises seen a month prior, so rates are closing in [on] levels not seen since the start of the year”.

She said: “Volatile swap rates spurred lenders to review their fixed mortgage pricing, which has resulted in rises across all loan-to-value tiers on two- and five-year fixed mortgages. Borrowers may be concerned by these movements, but one positive point to take from the latest trends is that mortgage shelf life has stabilised to 28 days.

“Despite lenders pulling selected fixed deals, some of which were priced below 5%, there was not a mass exit of products. It was evident that repricing during April was the clear focus among lenders, and in fact, mortgage product availability rose.”

Springall said that overall product availability was at its highest point in 16 years, with month-on-month growth coming to 258 deals, but is below the 303 month-on-month increase in the month prior.

She said: “This thriving product availability is widespread across the underlining LTV tiers, including those at 90% and 95%, so lenders are still improving choice for those with limited deposits or equity.”

Springall said that there were more five-year fixed rate mortgages than two-year deals, as has been the case since October 2022.

“Borrowers coming off a fixed rate mortgage this year will need to cover higher monthly mortgage repayments. Indeed, in May 2022, the average two-year fixed mortgage rate was 3.03%, and in May 2019, the average five-year fixed mortgage rate was 2.85%.

“It will still be cheaper for borrowers to grab a fixed mortgage now compared to sitting on a revert rate, based on average rates, and some borrowers may even consider a base rate tracker mortgage over the next two years if they are in line with economists’ predictions for the Bank of England to cut base rate this year. Consumers preparing to refinance or ready to buy their first home would be wise to seek advice to navigate the latest deals available,” she added.