According to analysis from L&C Mortgages, the average rate for a two-year fixed mortgage from the top 10 lenders has climbed from 0.89 per cent in October last year to 1.89 per cent in March this year.
This means that the average monthly payment has increased from £557.87 to £627.78 and the annual savings compared to a standard variable rate (SVR) has fallen from £2,629 to £2,107 in the same period.
This equates to monthly payments being around £70 more and annual payments rising by £800.
The average five-year fixed rate has risen from 1.05 per cent in October to 1.97 per cent in March, with average monthly payments increasing from £568.71 to £633.59 over the same timeframe.
The annual saving on an average five-year fixed rate compared to an SVR has gone from £2,499 in October to £2,038.
The average SVR and reversionary rates have already climbed by over 0.3 per cent to 4.14 per cent, which is due to the previous two bank rate rises.
Further bank rate rises are expected, possibly as early as next week when the Monetary Policy Committee meets again, meaning mortgage costs could climb higher.
L&C Mortgages urged borrowers to counter future rate rises by applying for a mortgage deal six months before the end of their current deal.
It said that as deals were changing constantly and lender offers were valid for three to six months, applications could be made in advance.
David Hollingworth, associate director – communications at L&C Mortgages, said: “Mortgage rates have been shifting rapidly as lenders are forced to adapt to the impact of market expectation of higher rates on their funding costs. The sheer pace of change is something that could take borrowers by surprise, especially when the cost of living and other outgoings such as energy are already rising too.
“Fixed rates are still at historically attractive levels so borrowers should review their current deal to make sure that they are on the best deal and protecting their position, especially against a backdrop of rocketing outgoings and further potential increases in base rate.”
He added: “Rates are moving quickly though and deals rapidly come and go, often only lasting a matter of days before being replaced with higher rates. Borrowers can lock in at a current rate up to six months ahead giving the chance to review well ahead and ensure a smooth switch over when their current deal ends. That could help them get ahead of any further rate rises.”
Average buy-to-let rates rise
Research by Property Master’s buy-to-let mortgage tracker, showed costs had risen for landlord borrowers too, with the average two-year fixed rate for a £160,000 loan at 60 per cent loan to value increased from 1.76 per cent to 2.06 per cent between February and March.
This equates to a £40 growth in monthly costs to £311 once fees are included.
The increase in rates was less pronounced for five-year fixes, with typical rates for the same loan at the same LTV going from 1.98 per cent to 2.23 per cent over the same period. This is equal to a rise of £33 per month.
The average SVR stands at 4.99 per cent, which has added £31 to monthly costs.
Angus Stewart, chief executive of Property Master, said: “We are now in a rising interest rate environment and most commentators expect another rate rise next week when the Bank of England meets again on Thursday, March 17th.
“With inflation continuing to increase, exacerbated by global events, we foresee additional base rate increases over recent months. We can already see lenders preparing to raise rates again so tightening the squeeze still further on consumers and landlords alike.”
He added that its team had one of its busiest weeks updating its search system as whole product ranges had been withdrawn and relaunched by lenders. He said the relaunched products had resulted in increased costs.
