Mortgage rates have soared in the past month, with the price difference between a two-year fixed rate and the equivalent of five years widening.
Borrowers considering borrowing with a two-year fixed mortgage rate will find that the average interest rate has risen 0.11% since last month to 5.91%.
For those who commit for five years, rates are cheaper, with an average deal of 5.48% – a jump of 0.9% since April, new data from Moneyfactscompare.co.uk shows.
This means that borrowers who take out a two-year mortgage will most likely have a higher interest rate refunds than they would if they opted for a five-year agreement.
But despite the fact that it is more expensive to lock in a new rate, borrowers coming to the end of an existing deal are being warned to ‘do nothing’.
For those tempted to wait and see if rates fall later this year, the interest rate you’ll return to if you don’t switch to a new deal is near a record high.
Moneyfactscompare said the average standard variable rate (SVR) iThe current 8.18% is just below the highest ever recorded – 8.19%.
Rachel Springall, financial expert at Moneyfacts, said: “Borrowers taking out a fixed rate mortgage this year will have to cover higher monthly mortgage repayments.
“In May 2022, the average two-year fixed mortgage rate was 3.03%, and in May 2019, the average five-year fixed mortgage rate was 2.85%. It will still be cheaper for borrowers to take out a fixed mortgage now than on an average rate basis, and some borrowers could even consider a base rate tracker mortgage in the next year or two if they are in line with expectations. economists. predictions that the Bank of England will cut the base rate this year.
“Consumers preparing to refinance or ready to purchase their first home would be wise to seek advice to find the latest deals available.”
Are tracker mortgages a better option?
According to Moneyfacts, the average tracker mortgage is currently 6.12%. This percentage has fallen from 6.14% in April.
Some borrowers prefer tracker mortgages because, although these are largely determined by the ups and downs of the Bank of England base rate, many have no early repayment charges and therefore offer more flexibility.
The Moneyfacts report offered good news for borrowers: product choices increased to 6,565, the highest number since February 2008.
In addition, the period during which mortgage agreements remain available has stabilized. Springall said: “Despite lenders closing select fixed deals, some of which were priced below 5%, there was no mass product exit. That was clear price revision in April was the clear focus among lenders, and in fact the availability of mortgage products increased.”