UK Mortgage Five-year Fixed Rates Reache Two-year High

By: MoneyFacts

Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, shows the average five-year fixed rate has increased for the first time in four months, seeing this average reach its highest point in almost two years, effectively cancelling out any gains made in that time as a result.

Darren Cook, Head of Press at Moneyfacts, said:

“The latest figures show that the average five-year fixed mortgage rate has risen by 0.04% this month to now stand at 2.95% (up from 2.91% in October). This marks not only the first time this average has increased for four months, but it is also the highest level seen since December 2016.

“Since the base rate rise in August, providers have tried to keep their five-year fixed rates as competitive as possible to attract those looking to remortgage, due to many borrowers looking to come off their standard variable rate (SVR) or lock in for a longer term to mitigate any potential further rises. As a result, the average five-year fixed rate fell by 0.02% last month.

“It seemed to be only a matter of time before providers increased their five-year fixed rates, as lenders could not continue to absorb the extra costs as a consequence of the base rate increase indefinitely, with many lenders having reassessed their options. Despite this, the pressure to remain competitive is far greater, and this is shown by the rate only increasing by 0.04% this month and by just 0.08% since the beginning of the year, up from 2.87%.

“Demand for five-year fixed mortgages has grown, with figures showing that these deals account for 47%* of the total remortgage market. This is unsurprising, as many borrowers look for some certainty in a very uncertain economy.

“Not only are borrowers looking for that extra peace of mind, but with lenders keenly pricing their five-year products, there is now very little difference between a traditional two-year product and its longer-term counterpart. For example, data from the Moneyfacts UK Mortgage Trends Treasury Report shows the average two-year fixed rate currently stands at 2.53%, just 0.42% lower than the average five-year rate, which is significantly lower than the difference recorded two years ago, when it stood at 0.64%.

“Borrowers coming to the end of their deal or sitting on an SVR who are considering a five-year fixed rate mortgage should look to remortgage as soon as possible, as with rates rising, it may be a case of now or never to secure a good deal.”

*LMS – 6 June 2018.

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