Mortgage rates see highest monthly rise in eight years


Almost half of lenders have upped their rates on the back of the Bank of England base rate rise, with more increases to follow

According to the latest Moneyfacts UK Mortgage Trends Treasury Report, the average two-year fixed mortgage rate rose by 0.12% this month.

This increase means that the last six months of rate cuts have now been fully reversed – plus a little bit more. While the average rate stood at 2.30% back in May, November’s average rate is now 2.33%.

This increase, which has been the highest monthly rise recorded since August 2009, has been blamed on the recent rise in interest rates, plus the rising SWAP rates. And it’s not just two-year deals that have been affected.

“Following the two- and five-year SWAP rates going up by similar amounts, the average five-year fixed mortgage rate has increased in the same dramatic fashion, having risen by 0.12% from 2.76% in October to stand at 2.88%,” said Charlotte Nelson, finance expert at Moneyfacts. “Since the start of October, 49% of lenders have increased their rates in some shape or form. The recent base rate rise is likely to only add fuel to the fire and cause rates to rise particularly in the variable rate market.”

What’s in store?

At the start of October, the cheapest two-year fixed mortgage available (with a 25% deposit and a £1,495 fee) was 0.99% from Yorkshire Building Society. After last week’s interest rate rise, the best rate for the same borrower comes in at 1.13%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, believes that the average rate will increase by around 0.5 percentage points in early 2018.

“The average quoted rate on a five-year fixed-rate mortgage fell to a record low of 1.90% in September, from 1.96% in August,” he said. “We expect October data to show that the five-year rate jumped to 2%, given that several high street banks recently have shunted up their rates.”

Despite the hikes, house prices are still expected to continue on their steady climb over the next five years, according to estate agent Savills.

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Mortgage rates see highest monthly rise in eight years


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