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Average two-year variable rate falls as number of tracker mortgages rises – Moneyfacts

  • 13/05/2019
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Average two-year variable rate falls as number of tracker mortgages rises – Moneyfacts
The average two-year variable tracker rate fell by 0.08% in May, taking it to 2.02% from 2.10% in April, according to Moneyfacts data.


The number of tracker rate mortgage products available has increased from 185 to 203 over the same period.

Of the products on offer, 123 were available to borrowers who required a maximum loan-to-value (LTV) of 75 per cent and below, while the remaining 80 were available to borrowers who required a mortgage of between 80 per cent and 95 per cent% LTV.

Since September 2018, a month after the Bank of England base rate increased by 0.25 per cent to 0.75 per cent on 2 August 2018, the average variable tracker rate has fallen by 0.15%.

It stands just 0.07% above the average rate prior to this base rate rise, which was 1.95 per cent on 1 August 2018.

The best two-year variable tracker rates were up to 60 per cent LTV, where the average rate stood at 1.72 per cent, Moneyfacts noted, 0.30 per cent below the overall average two-year variable tracker rate of 2.02%.

In comparison, the average two-year fixed rate at maximum 60% LTV was 1.90 per cent, which was 0.18 per cent higher than its variable counterpart average.


External factors driving fluctuations

Darren Cook at Moneyfacts noted the increasing number of products and subsequent intensifying competition has driven this average variable rate down.

He said: “Of course, it is to be expected that the average fixed two-year rate will likely be greater than that of the average variable rate, as borrowers pay more for the certainty of monthly payments with a fixed deal.

“The amount of interest a borrower is required to pay monthly on a variable tracker rate mortgage could of course change over time, but any fluctuations in rate are likely to be linked to external factors such as the Bank of England base rate.

“Markets are forecasting just a single interest rate increase by 2021, but with current economic conditions so unpredictable, this timescale may shorten and variable mortgage rates could increase sooner as a consequence.

“Therefore, those considering a variable rate tracker mortgage should always factor in any rate rises that could affect whether they can afford the monthly repayments for the length of their term,” Cook added.


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