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Mortgage rates: ‘The only way is up’ as lenders expect Bank of England hike

  • 26/02/2018
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Mortgage rates: ‘The only way is up’ as lenders expect Bank of England hike
Mortgage rates have only incrementally increased since the Bank of England raised the base rate last November, but they could be on the verge of a leap, analysis has shown.


The average two-year fixed-rate has lifted by just 0.07% over the past three months from 2.33% to 2.4% today, according to Moneyfacts.

At the same time, the typical five-year fixed rate has increased by only 0.05% from 2.88% in November to 2.93% in February.

Variable rates have seen the biggest increase, from an average 4.6% to 4.76%.

The limited change in rates is in part because lenders raised rates in the lead-up to the Bank of England’s hike, so the increase was already priced in by November, according to Moneyfacts.

Monetary policymakers are expected to move again in May, which is set to prompt lenders to start repricing in anticipation.

Already 22 individual lenders have increased rates in their range since the beginning of February, some more than once, according to Moneyfacts.


Inevitable rise

Charlotte Nelson, from Moneyfacts, said: “With a rate increase just a few months ago, many would have assumed that the market would be still reeling from its effects.

“However, it seems that due to the inevitably of the rise itself, the mortgage market has stabilised relatively quickly.”

Nelson warned that the tide is starting to turn again as Swap rates – which banks use to price their fixed rate mortgages – were starting to rise once again.

“This is a similar scenario to before the last rate rise, as providers are again starting to factor Swap rate rises into their pricing,” she continued.

“The only way from here appears to be up, so borrowers who are sitting on their standard variable rate, or coming to the end of their deal, would be wise to look for a fixed rate.

“It is now important that they act fast to ensure they get the best possible deal.”

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