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Average mortgage rates climb to fresh highs as product choice falls – Moneyfacts

  • 12/09/2022
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Average mortgage rates climb to fresh highs as product choice falls – Moneyfacts
Fewer mortgage products are available to borrowers and average rates have increased, data has shown.

According to the Moneyfacts UK Mortgage Trends Treasury Report, there are 517 fewer residential mortgage products on the market leaving 3,890 on offer in September. This is the lowest number of deals the firm has seen since April 2021, when there were 3,842 mortgages on the market. 

It is also 1,425 fewer deals than there were as of December 2021, before the first rise in the base rate. 

Further, the decline in mortgage products is apparent across all loan to value (LTV) tiers, which is the first time this has happened since April 2020. 


Rates on the up 

As mortgage product choice has fallen, the average rates have continued to rise. 

As of September, the average two-year fixed rate is 4.24 per cent, up from 3.95 per cent last month. Compared to last year, this is a jump from September 2021’s average of 2.38 per cent and even higher than September 2020’s average of 2.24 per cent. 

Average five-year fixed rates now stand at 4.33 per cent, up from 4.08 per cent in August. Compared to last year, this is up from an average of 2.63 per cent in the same month in 2021, and an increase from an average of 2.49 per cent in September 2020. 

Both the average two and five-year fixed rates have increased for the 11th month in a row. The current two-year average is at its highest since January 2013, when this was 4.24 per cent while the five-year average is the highest it has been since November 2012, when it was 4.47 per cent. 

Variable rates have risen too. The average standard variable rate (SVR) is now 5.4 per cent, compared to 5.17 per cent in August. This time last year, the average was 4.41 per cent. 

This is the ninth consecutive increase to the average SVR, and with a monthly jump of 0.23 per cent this was the highest increase since Moneyfacts’ records began in December 2007. The current average is also at its highest level since December 2008 when it was 5.68 per cent. 

The average two-year tracker rate is 3.33 per cent, up from 2.84 per cent in August. Compared to last year, this is up from an average of 2.55 per cent. 

Eleanor Williams, spokesperson at Moneyfacts, said: “Would-be mortgage borrowers will find that the level of product choice they are faced with has dropped again this month, now down to a level not seen in over a year.  

“The average product shelf life rose to 28 days in September, up from the record low of 17 days last month, but rather than this indicating a more stable mortgage market, when considered alongside the significant number of product withdrawals it may instead be a sign that lenders are tightening and condensing their ranges and focusing their product offerings.” 


‘Disappointing’ changes  

Williams added: “This may well be disappointing for many, particularly those with a now maturing two-year fixed rate deal who may be feeling rather concerned that at 4.24 per cent, the overall average rate is now two per cent higher than when they secured their deal (September 2020 – 2.24 per cent) – which may equate to payments on average of over £200 per month more than they have been used to paying. 

“However, it’s important these borrowers are not put off exploring their options, as the average SVR or revert to rate has also risen, currently sitting at 5.40 per cent – the highest we have recorded in over 13 years. Those who fall onto this could see their payments rise by an even more dramatic £344, and of course would not be protected from any future rate rises.” 


Cheaper tracker rates 

She said while the average tracker rates were lower than fixed rates, “it’s important that those tempted by one of these products, especially if that preference is based on the lower initial rate, speak to a qualified adviser to consider the implications.  

“With another base rate rise possible this month, and the chance of two further increases before year-end, ensuring their mortgage remains affordable if rates continue to increase is vital.” 

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