Mortgage rate rises gain pace: Moneyfacts

Product choice continues to improve, particularly in the high-LTV tiers, despite rising rates.

Related topics:  Mortgages
Rozi Jones | Editor, Barcadia Media Limited
13th May 2024
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"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."
- Rachel Springall, finance expert at Moneyfacts

Residential mortgage rate rises have gained pace, with average two and five-year fixed rates increasing by 0.11% and 0.09% month-on-month, the biggest jump since March 2024, the latest Moneyfacts data shows.

Overall average two and five-year fixed rates rose between the start of April and the start of May, to 5.91% and 5.48% respectively. The average two-year fixed rate stands 0.43% higher than the five-year equivalent, the biggest difference seen in six months.

The average SVR remained at 8.18%, just shy of the highest recorded (8.19%) during November and December 2023, while the average two-year tracker variable mortgage fell to 6.12%.

Product choice overall rose month-on-month, to 6,565 options, its highest level since February 2008 (6,760).

The availability of deals at the 90% LTV tier increased for a third consecutive month (791), now at its highest point in over 16 years (957 – March 2008). The number of deals at 95% LTV rose for a fifth consecutive month (347) and stands at its highest count in almost two years (347 – June 2022).

The average shelf-life of a mortgage product rose to 28 days, up from 15 days at the start of March 2024. The lowest shelf-life average on Moneyfacts records was 12 days in July 2023.

Rachel Springall, finance expert at Moneyfacts, said: “Mortgage rate rises have gained pace, with the average two and five-year fixed rates increasing by 0.11% and 0.09% respectively, the biggest month-on-month jump since March 2024. This counters the more subdued rises seen a month prior, so rates are closing in to levels not seen since the start of the year. 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.

“As reported last month, overall product availability is at its highest point in over 16 years, and another month-on-month growth, of 258 deals, is positive to see this month, but it fell short of the bumper 303 rise recorded the month prior. This thriving product availability is widespread across the underlining loan-to-value tiers, including those at 90% and 95%, so lenders are still improving choice for those with limited deposits or equity. Overall, there are more five-year fixed rate mortgages than two-year deals, and as has been the case since October 2022, the average five-year fixed rate remains lower than its two-year equivalent. However, the rate gap stands at 0.43% this month, the biggest for six months (November 2023 – 0.43%).

“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.”

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