Mortgage payments rise £200 on average two-year fix at remortgage

Homeowners with fixed rate mortgages face big increases in their monthly payments when they come to remortgage, as average rates on both two-year and five-year deals now top 4 per cent.

The average two-year fixed rate is now 4.24 per cent, the highest it has been since since January 2013. 

It means those currently looking to remortgage at the end of a two year deal – who fixed in September 2020 when rates sat at around 2.24 per cent – can expect to see their monthly payments increase by over £200. 

This is based on a property worth £286,000, the current UK average.

Those with five-year fixed rates coming to an end now face paying an average rate of 4.33 per cent, the highest since November 2012. 

Borrowers who fixed their mortgage rate five years ago at around 2.77 per cent would see their monthly payments increase by £180 for a property of the same value, according to figures from Hub Financial Services. 

Typical rates have risen for eleven consecutive months, according to analysts at MoneyFacts, and the number of mortgage products on the market has also fallen. 

Homeowners who transition on to standard variable rate mortgages at the end of a fixed term will see their payments rise even more dramatically. 

The typical SVR is now 5.40 per cent, up from 4.44 per cent in September 2020. 

According to Moneyfacts, a borrower with a £200,000 mortgage on a 25-year term coming off a typical two-year fix on to the typical SVR could see their payments rise by £344. 

Borrowers on SVRs are also not shielded from further interest rate rises. 

>> Browse the latest rates using This is Money and L&C’s mortgage finder 

The Bank of England has been steadily increasing its base rate since December 2021 when it sat at 0.1 percent. 

It is currently 1.75 per cent, with another hike to 2.25 per cent expected when the Monetary Policy Committee meets next week. 

Analysis from MoneyFacts shows the rapid rise of fixed-rate mortgage rates that are expected to climb further before the end of the year.

Graham Cox, director at SelfEmployedMortgageHub.com, said: ‘Ultra-low rates over the past decade have led to people borrowing up to the hilt, on the assumption rates would remain low. 

‘That’s no longer the case. Unfortunately, we could see a lot of distressed selling over the next year or two, driving down property prices.’

And while mortgage rates have risen the choice of product for borrowers has dropped. The number of available products for homeowners plummeted by 517 over the past month to leave just 3,890 on offer for September, the lowest number in over a year.

This is 1,425 fewer than were available at the start of December 2021 (5,315) before the first of the recent base rate increases. The number of products offered fell across all loan-to-value tiers, the first time this has happened since April 2020.

Eleanor Williams, finance expert at Moneyfacts, said: ‘The average product shelf life rose to 28 days in September, up from the record low of 17 days last month, but rather than this indicating a more stable mortgage market, when considered alongside the significant number of product withdrawals it may instead be a sign that lenders are tightening and condensing their ranges and focusing their product offerings.

‘It’s unlikely to be a surprise that average rates have continued to march upwards, with both the average overall two- and five-year fixed rates rising for the 11th consecutive month.

‘As may be expected, the average two-year tracker rate has also risen, shifting in line with the recent base rate increases. At 3.33 per cent, this is 1.75 per cent higher than the equivalent average rate in December 2021.

‘While this is lower than the current average two- or five-year fixed rates, it’s important that those tempted by one of these products, especially if that preference is based on the lower initial rate, speak to a qualified adviser to consider the implications. 

‘With another base rate rise possible this month, and the chance of two further increases before year end, ensuring their mortgage remains affordable if rates continue to increase is vital.’

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, or are a buy-to-let landlord, it’s important to get good independent mortgage advice from a broker who can help you find the best deal. 

To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.

Our mortgage calculator powered by L&C can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. You can also start an application online in your own time and save it as you go along.

> Compare the best mortgage deals available now