Insight from Moneyfacts showed that 31.3% of first-time buyers researching mortgages on Moneyfactscompare.co.uk looked into variable or tracker rate mortgages, compared with just 9.5% in February.
Moneyfacts said first-time buyer interest in tracker and variable mortgages averaged at less than 10% of search activity during the spring, before rates started to climb.
Share of FTBs researching variable and tracker rate mortgages versus fixed on Moneyfactscompare.co.uk
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|
Month |
Share |
|
February 2026 |
9.5% |
|
March 2026 |
6.7% |
|
April 2026 |
7.5% |
|
May 2026 |
7.7% |
|
June 2026 |
17.4% |
|
July 2026 |
31.3% |
|
Monthly share of users of Moneyfactscompare.co.uk comparing first-time buyer mortgage products. Users can compare multiple product types and terms per session. Source: Moneyfactscompare.co.uk |
|
Fixed mortgage rates prove costly
Over February to July, the average two-year fixed mortgage rate for a 90% loan-to-value (LTV) deal had risen by 65 basis points (bps) to 5.74%. For a first-time buyer borrowing £200,000 over 25 years, this would have increased monthly repayments from around £1,180 to £1,257.
Although rates started to ease in April, first-time buyers still faced a payment increase of around £924 every year compared to what they would have paid in February.
Meanwhile, the average two-year tracker rate at 90% LTV was 4.8% in July, equating to monthly repayments of around £1,146 on the same loan. This would save a borrower around £111 every month, or more than £1,300 per year compared to an equivalent fixed rate deal.
Typical monthly repayments on a £200,000 mortgage over 25 years (90% LTV)
|
|
Two-year fix (90% LTV) |
Two-year tracker (90% LTV) |
||
|
Month |
Average rate |
Cost |
Average rate |
Cost |
|
February |
5.09% |
£1,180 |
4.77% |
£1,143 |
|
July |
5.74% |
£1,257 |
4.8% |
£1,146 |
|
Difference |
+65bps |
+£77 per month |
+3bps |
+£3 per month |
|
Median monthly average rates at 90% LTV. Source: Moneyfactscompare.co.uk |
||||
Rising rates put pressure on finances, but variable deals are uncertain
Adam French, head of consumer finance at Moneyfactscompare.co.uk, said the jump in the share of first-time buyers researching tracker mortgages revealed the pressure higher rates were putting on budgets.
“For many borrowers, saving more than £100 a month compared with a fixed rate deal could make the difference between being able to buy a home or delaying their plans,” he added.
French said many tracker mortgages looked attractive as they were priced at around one percentage point above the base rate, “making them noticeably cheaper than equivalent fixed rate products”, but added that borrowers needed to remember that “today’s monthly payment is not guaranteed to last”.
He added: “Money markets are currently pricing in a couple of base rate hikes over the coming months. If those expectations prove correct, tracker mortgage repayments will rise too. Recent years have also shown how our volatile times can quickly move the outlook for interest rates, so anyone considering a variable mortgage needs to ensure they have enough room in their budget to cope with higher monthly repayments.
“While some borrowers may be prepared to accept that uncertainty in return for lower initial costs, others will value the security of knowing exactly what they’ll pay each month. The right choice ultimately depends on individual circumstances, but anyone stretching themselves to get onto the property ladder should carefully consider whether they can still afford their mortgage payments if interest rates move higher.”
