The average of the keenest 2-year fixed rate mortgages now stands at more than 2% higher than at the beginning of the year, analysis from L&C has found.
L&C’s remortgage tracker revealed that the average of the low loan-to-value (LTV) 2- and 5-year remortgage rates from the top ten lenders have leapt again this month.
The average 2-year fixed deal climbed by 0.26% to 3.46%, while the 5-year fix rose to 3.50%. The same figures in January this year were just 1.34% and 1.55% respectively.
A borrower taking a typical £150,000 repayment mortgage over 25 years at the average 2-year rate would now face monthly payments £159 more than at the beginning of the year, an annual increase in payments of more than £1900 compared to January.
Many borrowers are shopping around well in advance to try and get ahead of further market movement.
| Jan 2022 | Aug 2022 | |
| Av SVR/Reversionary | 3.85% | 4.81% |
| Monthly Payment | £779.38 | £860.36 |
| Av 2-year fixed | 1.34% | 3.46% |
| Monthly Payment | £588.69 | £747.72 |
| Annual Saving over SVR | £2,288 | £1,352 |
| Av 5-year fixed | 1.55% | 3.50% |
| Monthly Payment | £603.43 | £750.94 |
| Annual Saving over SVR | £2,111 | £1,313 |
The majority of our customers (66%) are now applying more than three months before the end of their deal and July saw the highest proportion of customers this year (22%) apply five and six months before their current deal ends.
Lenders have largely fed the recent base rate increases into their standard variable rate (SVR) and reversionary rates, the average of the top ten now standing at 4.81%.
The majority of borrowers are unsurprisingly electing to switch to fixed rates to cut their rate and avoid the SVR, as well as protect against the expectation of further rate hikes.
Switching from the SVR to the average 2- and 5-year fixed rates could cut the annual outgoing by more than £1300.
That saving could increase further if the Bank of England continues to raise rates, as many anticipate.
David Hollingworth, associate director at L&C Mortgages, said: “The mortgage landscape continues to shift rapidly as lenders balance volatile funding conditions and service levels, forcing frequent changes to mortgage products.
“As a result, mortgage borrowers face a rise in payments, whether as a result of base rate increases or as the protection of their current fixed deal comes to an end.
“As borrowers brace for another base rate rise this week many are unsurprisingly seeking the shelter of a fixed rate.
“That offers monthly savings as well as building in security of payment for households already feeling the pinch from other cost of living increases.
“We’ve seen borrowers recognise the rise in borrowing costs with more looking to lock into a rate sooner rather than later.
“Most are now starting the process at least three months in advance and a growing proportion up to six months before their current rate is due to expire, hoping to avoid any further increase in rates and reduce payment shock .
“The removal of the Bank of England stress test could give lenders a little more flexibility but this may only help them counter the cost of living rises which will inevitably weigh down on affordability.
“Finding the right combination of rate, fee and criteria will be crucial to find the right option to help manage what will typically be the single biggest outgoing.”
Give us your thoughts on the future of both mortgage rates and the base rate by taking our short survey here
