Interest Rate impact on Mortgages - a six month analysis

Interest rates for borrowers have shown mixed signs of both rises and falls over the past six months. Moneyfactscompare has analysed the average rates offered across mortgages and how the markets have changed over time.

Since the start of November 2023, the average two-year fixed rate has fallen from 6.29% to 5.91% and the average five-year fixed rate has fallen from 5.86% to 5.48%. These average rates have also risen from 5.80% and 5.39% respectively since last month.

On a 10-year fixed rate mortgage, the average rate has risen from 5.75% to 5.97% since November 2023. The rate has risen from 5.77% since the start of April 2024. The average standard variable rate (SVR) stands at 8.18%, down from 8.19% in November 2023. The rate has not changed since the start of April 2024.

Moneyfacts finance expert Rachel Springall says: “Borrowers may be disappointed to see fixed mortgage rates are on the rise. As has been the case since October 2022, the average five-year fixed mortgage rate remains below its two-year counterpart, which edges ever closer to 6%, not seen since December 2023.

“Lenders have been busy reviewing their fixed rate pricing in response to volatile swap rates, seeing month-on-month rises. However, fixed rates are lower than they were six months ago, so consumers who are now coming off a two- or five-year fixed mortgage would be wise to act quickly to grab a competitive deal, particularly as some lenders have withdrawn deals priced below 5%.

“The mortgage market continues to be fluid despite no change to the Bank of England base rate since August 2023, and market forecasts have pushed back imminent cuts, due to stubborn inflation.

“Affordability continues to pose a challenge to buyers due to interest rates being higher than they may have expected this year, but also the persistent lack of affordable housing. This is having a notable impact on first-time buyers, who may have exhausted all their savings to raise a substantial deposit, and do not have the Bank of Mum and Dad’ to help them buy their first home.

“Those borrowers looking to remortgage may also face much higher repayments when they come off their deal, but they would still pay less with a fixed mortgage than on a revert rate, based on average rates.

“The average Standard Variable Rate (SVR) stands above 8%, so it’s much higher than the average two-year fixed rate. A typical mortgage being charged the current average SVR of 8.18% would be paying around £290 more per month, compared to a typical two-year fixed rate (5.91%). Borrowers concerned about grabbing a new deal would be wise to seek advice from an independent broker, and any existing customers should speak to their lender if they are struggling with repayments.”

Average standard variable rate (SVR) is currently 8.18%. Calculations based on a £200,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,567 per month, versus £1,277 per month on 5.91% two-year fixed rate.