The Moneyfacts UK mortgage trends treasury report illustrated how average rates and product availability has shifted since the first of the recent Bank of England’s base rate rises.
The central bank raised rates for five successive months between December 2021 and June 2022, increasing the base rate from 0.15 to its current 1.25 per cent.
Moneyfacts said the average SVR for June reached 4.91 per cent following a rise of 0.13 per cent compared to last month’s equivalent rate, and of 0.51 per cent since December 2021.
It said the rise was the highest it had recorded since February 2009 when it was 4.94 per cent, surpassing the pre-pandemic average revert to rate of 4.90 per cent in March 2020.
For the eighth consecutive month the average overall two-year fixed rate has risen. At 3.25 per cent, the overall average two-year fixed rate has gone up by 0.22 per cent since last month, and by 0.91 per cent since December 2021. This is now the highest Moneyfacts has recorded since November 2014 at 3.31 per cent.
The overall five-year fixed rate average sits at 3.37 per cent following a month-on-month increase of 0.20 per cent and is the highest on our records in seven years; compared to June 2015 when it was 3.38 per cent or, 0.73 per cent higher than the equivalent rate in December 2021.
This means that the margin between the average two- and five-year fixed rates is now just 0.12 per cent – the smallest differential since February 2013.
The average two-year tracker rate has climbed to 2.54 per cent representing an increase of 0.27 per cent compared to last month, and a rise of 0.96 per cent when compared to the equivalent rate from December 2021 when it was 1.58 per cent. This is the highest recorded since September 2014 when the rate was 2.61 per cent
Eleanor Williams, finance expert at Moneyfacts, said: “Between the start of December 2021 and the beginning of June 2022, the Bank of England had raised the base rate by a total of 0.90 per cent. Since then, there have been fluctuations in mortgage product availability, this month dipping by 100 products to leave 4,987 deals for would-be borrowers to choose from.
“This is a fall of 328 when compared to December 2021, although the level of choice in the market remains up when compared year-on-year.
Williams said Moneyfacts data also showed product shelf-life had fallen back to the record low of 21 days this month, as providers continue to tweak their offerings and condense their ranges in light of an ever-changing economic background, which means that some deals may not be available for long before they are withdrawn or amended.
She added: “The overall two-year tracker rate rose again this month, now 2.54 per cent, which represents a rise of 0.96% per cent when compared to December 2021 and the highest it has been for almost eight years.
“Average rates for those with higher levels of equity or deposit have seen some of the steepest increases, which may come as a surprise as products at this end of the loan to value spectrum have traditionally been priced lower, in part due to the smaller risk of default they tend to pose for providers. ”
“At 65 per cent LTV the average two- and five-year fixed rates rose by 0.57 per cent and 0.47 per cent month-on-month to sit at 3.55 per cent and 3.77 per cent respectively – increases of 0.89 per cent and 0.90 per cent compared to the equivalent rates in December 2021, having risen roughly in line with the uplift in the Bank of England base rate over the same period.”
Williams said it was at 60 per cent LTV that Moneyfacts had recorded the largest rate increases in the two- and five-year averages since December 2021. “These equivalent rates rose to 2.91 per cent and 3.05 per cent this month, a significant 1.25 per cent and 1.12 per cent above where they sat in December 2021 when they were 1.66 per cent and 1.93 per cent respectively.”
“It’s interesting to note that it’s only the 90 per cent and 95 per cent LTV tiers (so often favoured by first-time buyers) where the average two- and five-year fixed rates remain lower now than they were this time last year, which may give hope to those looking to take a step onto the property ladder. While many consumers are battling the ongoing cost of living crisis though, it remains to be seen how any further changes in the market will impact prospective mortgage borrowers.
“The average SVR rate of 4.91 per cent is the highest recorded in over 13 years (February 2009 – 4.94 per cent), having risen by 0.51 per cent since December 2021.”
The difference between the average SVR and the average two-year fixed rate has shrunk to 1.66 per cent as lenders react to a changing economic landscape.