"Less than two weeks have passed since the Bank of England’s rate rise and the majority of providers in the variable tracker market have already passed on the increase"
The average two-year variable tracker rate has increased by 0.20% since 1 November, meaning the sub-1% two-year tracker is no longer available on the market, according to Moneyfacts data.
The majority of mortgage providers have already increased their variable tracker rates since the Bank of England’s base rate announcement on 2 November.
The lowest rate on the market at the start of November was 0.99%, but this has since risen to 1.24%. The average two-year variable tracker rate is now 1.97%.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “Less than two weeks have passed since the Bank of England’s rate rise and the majority of providers in the variable tracker market have already passed on the increase, causing the average two-year variable rate to rise and effectively cancelling out any gains made in the past six months.
“The 0.25% increase to Barclays Mortgage’s 0.99% two-year variable tracker rate marks a significant shift in the market and means it’s the end of the sub-1% tracker era. Unfortunately, with little room to manoeuvre at such low rates, providers have no choice but to pass on the base rate rise to borrowers.
“The very nature of variable tracker rate mortgages means that as base rate rises, so will the rates on these deals. The quick reactions of providers only illustrates the extent to which the market had been prepared for the rise.
“Unfortunately, while it seems that providers have been quick to pass the rate rise onto borrowers, when you look at the savings market a different picture emerges. With many savings rates still under review, it may come as no surprise that only 18 providers pay 1% or more on their easy access savings account.
“Back in the mortgage market, meanwhile, Standard Variable Rates have been slower to react, with many providers opting to review their rates thoroughly before announcing any increases. However, with the average SVR standing at 4.66% today, these rates are already significantly higher than those on many other options available to borrowers today.
“With some suggesting that another base rate rise could be on the cards next year, borrowers should perhaps consider battening down the hatches and opt for a fixed rate to secure their monthly repayments for a significant amount of time. However, with rates likely continuing to rise they will need to act fast to secure the best possible option for them.”