Fixed rates increasing at record pace

Moneyfacts says that aside from base rate increases, there are numerous other factors which affect fixed rate pricing

Fixed rates increasing at record pace

Average overall two- and five-year fixed rates have increased sharply this month, experiencing the largest month-on-month rises on record, data from the latest Moneyfacts UK Mortgage Trends Treasury Report has shown.

The average overall two-year fixed rate has increased by 0.49% month-on-month to 3.74%. It is now 1.40% above where the rate sat in December, the highest that Moneyfacts has recorded in over nine years, when it was at 3.80% in May 2013. The rate has risen for a ninth consecutive month.

The overall five-year fixed rate average has increased by 0.52% to 3.89% and has also risen for nine successive months. This rate is the highest on Moneyfacts’ records since November 2014 when it was 3.93%. It is now 1.25% above the equivalent rate recorded in December at 2.64%.

Moneyfacts also revealed that the average two-year tracker rate has climbed to 2.74% after an increase of 0.2% compared to last month and is now the highest recorded since June 2014 when the rate was 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 Standard Variable Rate 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 when the rate was at 4.4%, prior to the first of the recent base rate rises, this has gone up by 0.66%. The latest rate is now the highest recorded since January 2009, when the rate was at 5.14%.

“Product choice took another dip this month as mortgage lenders continue to revise their ranges in the face of ongoing economic uncertainty,” Eleanor Williams, finance expert at Moneyfacts, said.

“We have seen some providers pull selected products, while others have withdrawn whole sectors of, or indeed their entire ranges, from the market temporarily.”

Williams added that 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 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 loan-to-value 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,” she stated.

The finance expert said there are numerous factors which affect fixed rate pricing, rather than it simply tracking the Bank of England base rate.

Providers consider many influences, such as funding, swap rates, pricing pressures from other providers, and being able to maintain their service levels, among others.

“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,” Williams said.