Recent data has revealed that interest rates on average new two-year fixed-rate mortgages have passed a key benchmark. According to the figures, the average rate on these mortgages has broken the 4% barrier for the first time since early 2013. Moneyfacts reported an increase of 0.14% on these two-year fixed-rate deals, taking the average rate to 4.09%.
Officials said that the price of new mortgage loans was rising faster than interest rates in the UK, causing huge issues for those considering taking out a mortgage. According to the figures, the average rate on a new two-year fixed-rate mortgage in December last year was 2.34% but has since increased by 1.75%. On the other hand, the base rate has risen by 165 basis points in the same period, from 0.1% in December last year to 1.75%.
The Moneyfacts data also showed that the average rate on a five-year fixed-rate mortgage has now increased by 1.6% to 4.24%. In December last year, the rate stood at 2.64%.
Deals being pulled more quickly
The data also pointed out that new mortgage deals are being pulled more quickly by lenders than they were previously. In fact, the shelf life of new mortgage deals fell to record lows of 17 days at the start of this month.
Earlier this month, the Bank of England increased the base rate by 0.5%, double the previous hikes this year. As a result, many lenders pulled special mortgage deals and repriced their mortgage loans with minimal notice in some cases.
This has come at a challenging time, as many homeowners are now looking for new, affordable mortgage deals. Many fixed-rate deals are due to end over the remainder of this year, but lenders are pulling mortgage deals so quickly means that homeowners will have few options.
Eleanor Williams, a mortgage expert at the data provider, said: “The level of choice has reduced … We have seen lenders withdraw parts of, or entire, product ranges, with a number citing the pause in lending being due to unprecedented demand.”
Homeowners are already under a considerable amount of financial pressure as a result of soaring living costs, but those on fixed rate deals have been protected from the interest rate hikes for the moment. However, this will quickly change when their current deals expire, and many may be unable to find another affordable deal.