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Average fixed rates reach five-year high and product shelf life falls

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  • 11/04/2022
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Average fixed rates reach five-year high and product shelf life falls
Two and five-year fixed points have reached their highest rates since 2015 and 2016 respectively with borrowers urged to act now to lock in lower rates.

Accord to Moneyfacts, the average rate for a two-year fixed rate product is 2.86 per cent, which is the highest since June 2015 when the average price was 2.87 per cent. It is also up 0.21 per cent since March this year.

The average rate for a five-year fixed rate product is 3.01 per cent, which is the highest since October 2016 at 3.02 per cent. It is also a rise of 0.13 per cent compared to the prior month.

The firm added that the margin between these rates was 0.15 per cent, which is the smallest difference since 2013 when it was 0.08 per cent.

The shelf-life of products has also diminished with the average now 21 days, which is down from 29 days in April last year and a reduction of over half from 48 in April 2020. It said that this was joint lowest in its records.

Average rates for two-year tracker products increased by 0.18 per cent month-on-month to 2.21 per cent. This is also up from 2.27 per cent in April last year and 1.88 per cent in April 2020.

The average Standard Variable Rate (SVR) has also risen by 0.1 per cent month-month to 4.71 per cent in April and is now at a two-year high. It was last at this level in April 2020.

Product choice has also improved with total products now standing at 4,925, which is up from 4,838 in March and an increase from 3,842 in the same period last year.

Eleanor Williams, finance expert at Moneyfacts, said that those looking to secure a new mortgage should “act sooner rather than later to lock in a competitive option” as average rates have continued to climb, and the shelf life has reduced.

She added that the continued increase in average rates showed a “busy period of re-pricing as lenders have reacted to three back-to-back base rate rises and continued wider economic volatility”.

Williams said that this was the sixth consecutive month of increases and that rates had risen across most lending tiers.

She continued: “While fixed rates are not intrinsically linked to base rate and therefore are not set to rise exactly in line with its fluctuations, it is interesting to note that since December 2021 both the two and five-year overall average fixed rates have risen by 0.57 per cent and 0.42 per cent respectively.

“This compares to the average two-year base-rate tracker rate, which has risen by 0.63 per cent since December, which is roughly in line with the 0.65 per cent rise in base rate since then.”

Williams said that the average SVR had “risen more slowly than might have been expected”, going from 4.4 per cent to 4.71 per cent since December.

She added this was a two-year high and borrowers could potentially save over £200 a month by securing a fixed rate deal.

Williams said: “The appeal to switch to a mid-term fixed rate such as a five-year deal over historically cheaper short-term fixed rates based on price has lessened as rates have risen. The margin between two and five-year average fixed rates has shrunk to just 0.15 per cent, the lowest we have recorded since February 2013 (0.08 per cent).

“However, as there is no guarantee rates will not continue to climb, the incentive to secure a competitive new fixed rate to provide shelter from potential further rate volatility remains, and as our top tables show, there are still products with extremely competitive rates available, but the support and advice of a broker in securing these could be wise.”

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