Mortgage interest rates are still rising, but the increase is not as strong as in previous months.
Average prices for fixed rate deals rose 0.02% last month and are ‘slightly lower’ than in December 2023, according to Moneyfacts data.
For borrowers looking for a two-year fixed rate, the average interest rate is now 5.93%. When it comes to five-year interest rates, the typical interest rate is 5.50%, according to Moneyfacts.
The difference between the typical two- and five-year deal is now 0.43%. According to Moneyfacts, the gap has not been this wide since October 2023.
It means that agreements with a term of two years are more expensive than mortgages with a fixed term of five years.
The average standard variable rate (SVR) has remained at 8.18% – this is the rate you go to if you end your deal and don’t switch to a new mortgage product.
Meanwhile, Moneyfacts revealed that the average two-year variable mortgage fell to 5.94%.
The number of mortgage products available is at a level not seen since February 2008. According to Moneyfacts, there were currently 6,629 options.
However, the average shelf life of a mortgage product fell to 15 days, the lowest level since March, compared to 28 days a month earlier. This means borrowers have a smaller window to close deals.
Rachel Springall, financial expert at Moneyfacts, said borrowers may be discouraged to see another month in a row of mortgage rates rising, but the increases were modest – the smallest month-on-month increase this year.
“The incentive to commit for longer remains,” she added, “with the average five-year fixed rate being 0.43% lower than the two-year counterpartand the incentive to remortgage is prevalent, as the average SVR is 8.18%.
“The first few weeks of May saw lenders repricing rates in response to a volatile swap rate market, but the latter end of the month was more subdued, around the time the government announced a general election in July take place.
She added: “Consumers concerned about rising interest rates would be wise to seek advice from an independent broker to see if they can close a deal early, as some allow borrowers to do this three to six months in advance .
“However, there may well be some borrowers holding back, hoping that the market will see a base rate cut this year, but they can still get a lower rate than if they stayed on their SVR sit without making a correction, such as with a tracker deal.
“Those about to take out a five-year fixed mortgage will have to face the reality that interest rates are now much higher on an equivalent deal, in fact 2.65%, compared to June 2019, so consumers should make sure they can afford the higher repayments. ”