After months of gradual interest rate increases, mortgages have seen a sudden jump in the past two months, according to new analysis by financial information experts and ratings providers, Defaqto.
The Bank of England (BoE) is expected to announce an interest rate increase this afternoon and lenders have been quick to adjust their mortgage products to align with this.
In April this year, the best interest rate for a 2-year fixed mortgage at 75% LTV was just 1.95%. in two months, this has jumped to 2.49%.
This increase is higher than the underlying BoE interest rate rise (0.75% to 1%), as lenders prepare for more increases to come.
At the same time, the number of fixed rate mortgages available to borrowers has shrunk as lenders continue to withdraw these products from the market.
Today there are 1,953 fixed rate mortgage deals available, which is similar to March 2021 levels (1,995 mortgages) and is a significant drop on what was available just two months ago (2,086 mortgages).
Those who have larger deposits and need a mortgage at 85% LTV will see the biggest increase. This will typically be those who are re-mortgaging having built up equity in their home or are moving house.
Two months ago, the best rate was 1.97% for a 2-year fixed product and this has soared up to 2.94% today – almost half more expensive.
Mortgage products offering a 5-year fixed period at 85% LTV have seen similar increases with best buys going from 1.96% to 2.79%.
Those with smaller deposits, typically first-time buyers and second-steppers, actually have more choice today than they did a year ago (227 95% LTV fixed mortgages vs 155). However, the best 2-year fixed rate is 2.69% for 90% LTV and 3.24% for 95% LTV.
Katie Brain, consumer banking expert at Defaqto, said: “Interest rates continue to rise, and unfortunately most fixed rate mortgage best buys have increased by more than just the base rate.
“However, it’s not all bad news, the higher LTV rates have not increased as much as the lower LTV’s, so for people looking to purchase a property for the first time, it may be a good time to take the plunge.
“It is very likely that base rate will go up again today, so it is worth reviewing your mortgage now if you are coming out of a deal or if you are on a provider’s Standard Variable Rate as interest rates look to be only going one way, up.”
