Mortgage Rates: Fixed Rates at Fastest Pace in 15 Years

Average mortgage rates have risen 0.5 percentage points in a month, and interest rates on home loans have reached highs not seen since the mid-2010s.

Five-year fixed-rate offers are now averaging 3.89 percent, up 0.52 percentage points from June and the highest interest since November 2014, according to Moneyfacts.

It means someone taking out a £300,000 mortgage today could be paying £84 more each month than someone who locked in their rate in June.

Bigger bills: Someone taking out a £300,000 mortgage today would be paying an average of £84 a month more than they would have paid if they had done the same deal in June.

And homeowners coming to the end of fixed agreements could be hit with higher monthly bills when they remortgage, especially if they haven’t built up enough equity in their home to move up a loan-to-value tranche and secure a cheaper rate.

In 2017, average five-year fixed rates were just 2.85%, 1.04 percentage points lower than today.

The average monthly payment on a £300,000 five-year fixed mortgage over 25 years in 2017 would have been £1,399, but someone taking out the same mortgage today would pay £166 more each month at £1,565 .

The total interest they would pay over the fixed term would increase by almost £10,000, from £83,960 five years ago to £93,921 now.

Meanwhile, the two-year average fixed-rate mortgage also rose to its highest level since 2013 this month.

The typical rate is now 3.74 percent, up 0.49 percentage points from June, according to Moneyfacts.

Rise: Rates have risen to record highs, raising concerns about the costs of remortgaging

Rise: Rates have risen to record highs, raising concerns about the costs of remortgaging

This time in 2021, the two-year fixed average was 2.55% and the five-year average was 2.78%, 1.19 and 1.11 percentage points lower than current rates, respectively.

Chris Skyes, CTO of mortgage company Private Finance, said: ‘By exiting a deal now, clients will in most cases get a higher interest rate than they have been used to paying for years.

“The only situations I’ve seen recently where I get a better rate for a client is where they originally had a 95 percent loan-to-value ratio and now they have a much lower loan-to-value ratio, so they’re getting benefiting from that, or where before they had very specialized circumstances, like bad credit or very complex income, so they had to go to a specialized lender and now they can go to a conventional one.

While he suggests other routes to save on your mortgage, including extending the term of the agreement or putting an amount down only for interest, he cautions that this can cost more in the long run.

“My honest financial recommendation is to stick with the payments if you can,” Sykes said.

Standard variable rates have also risen, according to Moneyfacts, topping 5 percent for the first time in 13 years.

Having risen 0.15% this month, the average SVR now stands at 5.06%, an increase of 0.66 percentage points from December 2021, when it stood at 4.4%.

how to remortgage

Buying a home is the biggest purchase most people make. Most require a mortgage to do so and breathe a sigh of relief once it’s fixed.

But time flies and with Britain’s favorite mortgages being two-year and five-year fixed rates, many homeowners find their deal is up and it’s time to re-mortgage sooner than they think.

At that point, it’s time to dive back into a mortgage world many of us know little about, and with interest rates rising, it’s important to make sure you re-mortgage right and move to the best possible new fixed rate or another offer.

The Bank of England raised its base rate from 0.1 percent to 1.25 percent in the space of six months and L&C figures recently revealed that the best two-year fixed-rate mortgage has more than tripled.

Our guide explains what you need to know about remortgage, including whether to switch banks or building societies, why it makes sense to use a broker, how to revalue your home, why you might be in a better loan-to-value category, and thinking about how long to fix your mortgage for this round of time.

The increases ‘will not cause widespread financial problems’

Despite these increases and the ongoing cost-of-living crisis, Andrew Wishart, senior property economist at Capital Economics, says it’s unlikely we’ll see remortgages push substantial numbers of homeowners into financial hardship.

This view is supported by the Bank of England. In its July Financial Stability Report, it said that even after adjusting for rising costs of living and interest rates, the share of households with very high debt-servicing costs would remain well below crisis levels. financial.

According to Wishart’s figures, the hardest hit will be those that reach the end of a two-year arrangement in September 2023.

Based on a 25 per cent deposit mortgage secured against the average home, he predicted that monthly payments would rise from £719 to £882.

Plan ahead: Experts suggest borrowers start shopping for deals up to six months before the need to remortgage to try to get a more favorable rate

Plan ahead: Experts suggest borrowers start shopping for deals up to six months before the need to remortgage to try to get a more favorable rate

Why are rates going up and what should you do?

Fixed mortgage rates often rise and fall in a similar pattern to the Bank of England base rate, which has been gradually increased since December in an attempt to reduce inflation, but are also affected by other factors.

Eleanor Williams, Finance Expert at Moneyfacts, said: ‘There are numerous factors that affect the price of the fixed rate, rather than simply following the Bank of England base rate.

“Providers take many influences into account, including financing, interchange fees, pricing pressures from other providers, the ability to maintain their service levels, and more.

“Having said that, it is interesting to note that in the period between December 2021 and July 2022, the base rate increased from 0.10 percent to 1.25 percent, an increase of 1.15 percent in total.”

Last month the Bank of England raised the base rate to 1.25 percent, the fifth hike in six months.

At the time, the cheapest two- and five-year fixed-rate mortgage deals were charging more than 2.5 percent.

“It’s more important than ever for borrowers to review their mortgage, especially since other household costs are rising as well,” advised David Hollingworth of broker L&C.

“Those currently on a fixed rate will at least be protected from the rate increases currently taking place, but should look to the future when the current agreement comes to an end.

“Rates can be locked in for up to six months in advance, so in the current market it could be beneficial for borrowers to start their review earlier, allowing them to anticipate any further rate increases.

‘They should make sure they factor in the rates rather than just the zoning in the main rate. Most lenders offer a variety of options that can help with costs and fees that, for some, will be more cost-effective, even though the rate may be a bit higher.

“Those who managed to snag one of last year’s ultra-low rates may want to consider whether they can get the most out of that deal by paying a little more.

“Most offers will allow up to a 10 percent annual overpayment without incurring any early repayment fees, and while this is easier said than done, it could provide an opportunity to lower the mortgage while the rate remains lower, which that will help them prepare for a potential higher rate environment.’

The best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England base rate has risen rapidly.

If you’re thinking about buying your first home, moving or remortgaging, or are a buy-to-let landlord, it’s important to get good, independent mortgage advice from a broker who can help you find the best deal.

To help our readers find the best mortgage, This is Money has partnered with independent broker L&C.

Our L&C-powered mortgage calculator can allow you to filter offers to see which ones best match your home value and deposit level.

You can also compare different fixed-rate mortgage durations, from two-year arrangements to five-year arrangements to ten-year arrangements, with monthly and total costs displayed.

Use the tool at the link below to compare the best deals, taking both fees and rates into account. You can also start an online application on your own time and save it as you go.

> Compare the best mortgage deals available now

Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.