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Mortgage rates in six months of volatility despite unchanged base rate – Moneyfacts

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  • 20/06/2024
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Mortgage rates in six months of volatility despite unchanged base rate – Moneyfacts
Mortgage rates have fluctuated over the last six months despite there being no change to the Bank of England base rate, analysis from a financial information firm found.

According to Moneyfacts, the average two-year fixed rate has fallen from 6.04% in December 2023 to 5.93% currently. 

Over the same period, the average five-year fixed rate has gone from 5.65% to 5.5%. 

While average mortgage rates have declined over time, pricing in June was higher than last month, when the typical two-year fixed rate was 5.91% and the five-year fix was 5.48%. 

During this time, the Bank of England base rate has been maintained at 5.25% and the changes to fixed mortgage pricing have been influenced by swap rates. 

Variable mortgage rates have been less unpredictable, with the average standard variable rate (SVR) at 8.18% in June and unchanged from the previous month. Compared to December last year, this was slightly down from an average of 8.19% 

 

Affordability a ‘pressing point’ for borrowers 

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The rising cost of mortgages may cause deep concern for borrowers about to come off a fixed rate deal and needing to refinance. Affordability is a pressing point for both homeowners looking to refinance and new buyers, so those struggling to see how they can afford mortgage repayments will no doubt be desperate for interest rates to come down. Homeowners unsure on whether to lock in to a new fixed rate mortgage may still find it more affordable than falling onto [an] SVR, which stands above 8%. 

“This rate has almost doubled since the Bank of England started increasing base rate back in December 2021. A typical mortgage being charged the current average SVR of 8.18% would be paying £287 more per month, compared to a typical two-year fixed rate of 5.93%.”

She added: “Due to volatile swap rates, lenders have been increasing fixed mortgage rates, but are also withdrawing some deals priced below 5%. As a result, the average two-year fixed rate is nearing where it stood six months ago, undoing the positive rate cut momentum seen during the first quarter of 2024. The average five-year fixed rate has remained above 5% since June 2023, dipping above and below 6% over the past six months.

“At present, it’s cheaper to lock into a five-year fixed mortgage than a two-year deal, based on average rates, which has been the case since October 2022. First-time buyers who are struggling to get their foot onto the property ladder and don’t have the ‘Bank of Mum and Dad’ to lean on may feel getting a mortgage is too far out of reach right now. Regardless, the uncertainty surrounding interest rates should make it vital for borrowers to seek advice from an independent financial adviser to review all the options available to them.” 

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