Average two-year fixed rate at 19-month high

09 April 2018

Moneyfacts UK Mortgage Trends Treasury Report data (not yet published) reveals that the average two-year fixed rate mortgage has increased for the second month in a row, to reach the highest point seen since September 2016.

Source: Moneyfacts Treasury Reports

“The latest figures show that the average two-year fixed rate mortgage has risen for the second month running, increasing by 0.04% in just one month. Reaching 2.43%, the average is now the highest seen since September 2016.

“After months of stagnation, both March and April’s increase on the average two-year fixed rate has now effectively cancelled out any rate reductions that may have occurred in the last 19 months. Speculation surrounding a base rate rise in May has also spiked, with providers perhaps starting to factor it in already.

“The two-year SWAP rate has risen to its highest value since August 2015, rising by 0.08% to stand at 1.11% today. As a result, providers have had little choice but to begin increasing rates to factor in the higher funding costs to their pricing.

“The increase to the average two-year fixed rate may also have been affected by the withdrawal of products from the 60% loan-to-value (LTV) sector. In fact, the total number of 60% LTV products has fallen below 500 for the first time since September 2016, reaching 495 today.

“In recent years, the 60% LTV market has been booming. There have been vast numbers of products introduced, often at record-lows, to attract borrowers who are looking to remortgage. However, with a base rate rise looming, providers could be withdrawing deals in anticipation of this. Alternatively, it could be as a result of finding themselves oversubscribed by borrowers, who will be looking to get a better deal before rates start to rise further.

“With rates on the rise before the Bank of England has even made a decision on whether to increase interest rates, borrowers who are either coming to the end of a deal or sitting on their SVR should consider remortgaging as soon as possible. This way, they can ensure they do not miss out on a low rate before they all disappear.”

Best Buys and true cost scenarios available upon request.

The Moneyfacts UK Mortgage Trends Treasury Report, out later this week, provides an in-depth monthly review of today’s changing mortgage trends, including all the relevant facts on the UK’s residential and buy-to-let markets.