Two-year average fixed rate exceeds 4%: Moneyfacts

“In the volatile realm of swap rates, short-term rates of up to two years have recently been more expensive than their longer-term equivalents of five and ten years”

A few weeks after the last decision to increase the base rate from 0.50% to 1.75% on August 4, the overall two-year average fixed rate rose by 0.14% and now stands at 4.09%.

This is the first time that this rate has exceeded 4% since February 2013, when it was also 4.09%. In December 2021, the two-year average fixed rate was 2.34%, so it has increased by 1.75% so far in 2022, which is 0.10% more than the base rate has increased during of the same period.

The overall five-year fixed average has risen 0.16% since the start of August to 4.24%, up 1.60% from December 2021 (2.64%). However, over this same period, the difference between the average two- and five-year rates narrowed from 0.30% to 0.15%. The reduced cost-benefit of two-year fixed rates compared to five-year fixed rates may encourage consumers to consider the added security of fixing longer-term payments.

Conversely, the average 10-year fixed rate was flat, rising 0.01% in August to settle at 4.20% today, making it 0.04% lower than the fixed rate. current five-year average.

Eleanor Williams, finance expert at Moneyfacts, said: “The average shelf life of a mortgage product had hit an all-time high of just 17 days earlier this month. Following another increase in the base rate since then, providers are continuing to respond with a further revision of their offerings The level of choice has shrunk, dropping by 269 products and leaving 4,138 on sale currently We have seen lenders withdraw parts or entire product lines, with a number citing the pause in lending being due to Unprecedented Demand Providers are having to manage their service levels following an influx of inquiries as borrowers rushed to close deals before rates had a chance to climb even higher.

“Those looking to fix longer might be pleased to see that the average 10-year fixed rate has barely changed since the start of the month, rising 0.01% to sit at 4.20% today. This is actually 0.04% lower than the current average five-year fixed rate. In the volatile area of ​​swap rates, short-term rates of up to two years have recently been more expensive than their long-term equivalents of five and ten years, indicating that risks are seen to be greater in the future. near than in the longer term. , and thus fueling lower prices for consumers on the corresponding mortgage products.

“For consumers hoping to mitigate some of the impact of the current cost of living crisis with a new fixed arrangement, it may be wise to seek advice as this remains a very changing landscape, and to ensure that “they choose a product that matches their future plans and priorities. is crucial. Locking themselves into a fixed decade deal could be a double-edged sword; mortgage rates are currently on an upward trajectory and it is expected that Further base rate hikes could impact the sector, so securing a stable long-term fixed rate deal may well be top of mind for many consumers. have others who believe rates may fall during this time, and as many transactions in this sector carry heavy prepayment penalties, some may fear that they will not e are linked to a higher rate and refunds, if cheaper offers resurface. line.”

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