There’s been a whirlwind of rate fluctuations that could impact your pocket. From the ups and downs of fixed rates to the steady climb of standard variable rates (SVRs).
Since September 2023, the mortgage market has seen its fair share of drama. The average two-year fixed mortgage rate, a popular choice for many homeowners, dipped from a steep 6.70% to a more manageable 5.76%. Meanwhile, the longer-term, five-year fixed rate also took a slide from 6.19% down to 5.34%.
However, this financial relief was short-lived as both rates have crept up since last month, marking a shift from 5.56% to 5.76% for two-year fixed rates and from 5.18% to 5.34% for five-year fixed rates.
10-Year Fixed Rates
For those looking down the road, the 10-year fixed rate mortgage has shown a slight increase since September last year, edging up from 5.82% to 5.98%. Even more recently, from the start of February 2024, it has nudged up from 5.87% to 5.98%.
Standard Variable Rates On the Rise
On the other end of the spectrum, the average SVR, which kicks in after fixed deals end, has inched up from 8.09% in September 2023 to a current standing of 8.18%. This gradual increase has been consistent, with a slight uptick from 8.17% since the beginning of February 2024.
Rachel Springall, a mortgage expert from Moneyfactscompare, said, “The downward turn in fixed mortgage rates has gone in the opposite direction over the past month, with lenders vigorously re-pricing deals in response to volatile swap rates. It is worth noting that rates are much lower than six months ago, when both the average two- and five-year fixed mortgage rates were over 6%. The last time the Bank of England increased base rate was back in August 2023, but no change does not mean stagnation in mortgage rates as other influences remain at play, so borrowers must not be complacent if they are searching for a new deal. Indeed, lenders have been quick to reassess their rate pricing over the past month and even pulled deals from the market. It is vital lenders consider the volatility surrounding swap rates, so mortgage rate pricing can quickly change direction in a matter of weeks. Despite notable rate cuts made between the start of January and February, the average two- and five-year rates saw a sizeable cut. Borrowers worried about securing a new deal would be wise to seek advice from an independent broker, and any existing customers should speak to their lender immediately if they are struggling with repayments.”
The Impact on Borrowers
The current average SVR of 8.18% towers over the average two-year fixed rate of 5.76%. This discrepancy means that a homeowner on the average SVR could be paying around £308 more each month compared to if they were on a typical two-year fixed rate.
Springall emphasises the importance of seeking professional advice, especially for first-time buyers navigating these choppy waters. With the double challenge of high rates and a limited supply of affordable housing, getting onto the property ladder requires careful planning and guidance.