Fixed rate mortgages three times more expensive

The cost of the average fixed rate over two years is now three times more expensive than last October, according to figures from L&C Mortgages.

The recent increase in the Bank of England’s base rate and the expectation of further rate hikes have pushed up the cost of fixed rate transactions in recent months.

The L&C Remortgage Tracker shows that the low two- and five-year LTV remortgage rates of the 10 largest lenders jumped again this month, posting the second biggest monthly increase this year.

The average two-year fixed contract rose 0.35 percentage points to 2.71%, while the five-year fixed contract rose to 2.78%.

This is a sharp increase from historic lows last October, when the average two- and five-year fixed rates were just 0.89% and 1.05% respectively.

L&C says this means a borrower taking a typical £150,000 repayment mortgage over 25 years would face increased monthly payments of £125-130 – adding up to a total of £1,500 more a year in payments from last year’s low point.

However, he says that despite this increase, fixed rates remain low by historical standards and are still significantly lower than the average standard variable rate – which currently stands at 4.51%.

L&C Mortgages associate director David Hollingworth said: “The pace at which mortgage rates have moved has been astonishing and many lenders have continued to change their rates week after week making it difficult for borrowers to keep tabs. on the market.

“With so many impossible-to-avoid cost increases, mortgage lending remains an area where households can take positive action.

“Fixed rates naturally appeal to those looking to give some certainty to their biggest expense. We’ve seen more and more borrowers looking to get a rate plus before the end of their current deal, in an effort to get ahead of increases.

“As the cost of living rises and lenders’ feed rate rises in their affordability calculations, it will be important for borrowers to make the right choice from a criteria perspective and focus on best rates.”

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