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Mortgage costs hit a five year high as central banks raise base rates

After the Bank of England raised base rates to 0.75% lenders have reacted by increasing the cost of mortgages reaching a five year high.

The cost of mortgages at the highest level in five years as UK inflation rises to 7.0% and base rates at 0.75% due to the recovering economy and Russia-Ukraine war pushing up commodity prices.

Research from Moneyfacts shows the average cost of a two-year fixed rate mortgage popular with home movers and first time buyers has increased from 2.58% a year ago to 2.86%.

The best preferential deals for a two-year fixed rate were under 1.0% last year for a 60% loan to value mortgage and is now about 2.0% from the leading lenders.

Best deals disappearing fast

The Bank of England has increased base rates three times from an all-time low of 0.1% to 0.75% in March resulting in higher interest rates for homeowners on variable or tracker rates.

The shelf life of mortgage deals is just 21 days compared to April 2020 when it was 48 days as lenders change the prices of their products.

Large rises since December 2021 are for the two-year fixed deals up 0.57% and five-year fixed deals up 0.42% although these are not intrinsically linked to base rates.

A two-year base-rate tracker is higher by 0.63% since December and there is no guarantee fixed rate deals will not continue to rise with further rises in base rates in the future.

For remortgage buyers currently on the lender's standard variable rate with an average of 4.61%, savings can be made of 1.96% by switching to a two-year fixed rate with an average of 2.65%.

Based on a mortgage of £200,000 over a 25-year term on a repayment basis switching to the two-year fixed deal would save approximately £5,082 of interest payments.

What are the best deals on the market?

Mortgage rates have increased with the best deals for a two-year fixed rate at 1.99% from the Cumberland Building Society for a 60% loan to value (LTV) and £1,999 product fee, free valuation and legal fees.

For the three-year fixed rate Barclays offers 2.17% for a 60% LTV with £999 product fee and the top five-year fixed rate is Cumberland BS offering 2.11% for a 60% LTV with product fee of £1,999.

The best rates for first time buyers is also from Cumberland BS offering 2.24% for a two-year fixed rate with 90% loan to value (LTV) and £1,999 product fee, free valuation and legal fees.

Close behind is HSBC offering 2.29% for a two-year fixed rate and £1,000 product fee including free valuation.

What are your next steps?

Speak to our LCM mortgage advisers if you are remortgaging your home and looking for a competitive mortgage deal. Learn more by using the property value tracker chart and equity release calculator.

Start your free remortgage quote and we can show you the best mortgage offers for your property at this link:
Free mortgage quote with the leading mortgage deals for your home.

If you repay an interest only mortgage using equity release, we can recommend the products to meet your needs so begin your equity release quote for the latest provider offers.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%

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