The spread between two-year and five-year fixed rates is the lowest since February 2013 at 0.15%, as average fixed rates hit a five-year high, according to the latest data from Moneyfacts.
The average two-year fixed rate was revealed at 2.86% for April and is the highest since June 2015 after rising 0.21% since last month.
The five-year fixed rate totaled 3.01%, the highest since October 2016 when it stood at 3.02%, after increasing 0.13% month-on-month.
The report also revealed that the two-year average follow-up rate for all loan-to-value (LTV) ratios increased 0.18% month-over-month to 2.21%.
The hike represents a 0.63% increase since December 2021, which almost matches the 0.65% increase the base rate has seen over the same period.
Moneyfacts finance expert Eleanor Williams comments: “While fixed rates are not inherently linked to the base rate and therefore are not expected to increase exactly as it fluctuates, it is worth noting that since December 2021, the overall two- and five-year rates the average fixed rates increased by 0.57% and 0.42% respectively.
“This compares to the two-year average base rate tracking rate, which has risen 0.63% since December, roughly matching the 0.65% rise in the base rate since then,” adds Williams.
April also saw the average Standard Variable Rate (SVR) rise again, rising from 0.10% to 4.71%. The SVR is up 0.31% since December last year and stands at its highest level in two years.
Williams says: ‘This is the highest rate in two years (April 2020 – 4.71%) and means borrowers sitting on the average SVR could potentially cut their spending by over £200* per month by getting a mortgage at the current average two-year fixed rate.
“The call to move to a mid-term fixed rate such as a five-year deal on historically cheaper price-based short-term fixed rates has diminished as rates have risen.”
However, Williams stresses “there is no guarantee that rates won’t continue to rise.”
“The incentive to get a new competitive fixed rate to protect against possible additional rate volatility remains, and as our best charts show, there are still products with extremely competitive rates available, but the support and advice a broker to secure them might be wise,” she explains.
Meanwhile, borrowers hoping to secure a new mortgage product will see that the shelf life has plunged again to 21 days, which is the lowest ever recorded by Moneyfacts.
Williams says the decline reflects “a busy period of price revision as lenders reacted to three consecutive base rate hikes and continued broader economic volatility.”
“Those hoping to secure a new mortgage may want to act as soon as possible to lock in a competitive option, as not only have average rates continued on an upward trajectory this month, but potential borrowers may find that their products selected are not offered. a long time,” adds Williams.