Mortgage rates jump 2% in 2022: L&C Mortgages


According to L&C Mortgages, the average of the most attractive two-year fixed rate mortgage transactions is now more than 2% higher than at the start of the year.

The low average two- and five-year mortgage rates of the ten major lenders “rebounded” in July, according to the mortgage adviser’s Remortgage Tracker.

The average two-year fixed contract climbed 26 basis points to 3.46% last month, while five-year fixed contracts hit 3.50%. In January, these prices stood at 1.34% and 1.55% respectively.

A borrower taking a typical £150,000 25-year repayment mortgage at the two-year average rate now faces monthly payments £159 more than at the start of the year, adding to an annual increase in payments of more than £1,900 compared to January, according to the study.

The advisor adds, “Many borrowers shop well in advance to try to anticipate future market movements.

“The majority of our clients, 66%, are now applying more than the months before their contract ends. In July, the highest proportion of clients this year, 22%, applied five to six months before the end of their contract. current offer. “

The report says lenders have largely incorporated recent base rate increases into their standard variable and reversible rates, with the average rate for the top ten now at 4.81%.

“The majority of borrowers unsurprisingly choose to switch to fixed rates to reduce their rate and avoid the standard variable rate, as well as to protect against the expectation of further rate hikes,” the study adds.

It says moving from standard variable rates to two- and five-year average fixed rates could cut annual spending by more than £1,300.

The report adds: “These savings could increase further if the Bank of England continues to raise rates, as many expect.”

The study comes as the Bank is expected to raise the base rate, up to 0.5%, for the sixth straight time on Thursday.

The Bank has raised the key rate five times in a row since December, from a historic low of 0.1% to 1.25%, a 13-year high, to combat rising inflation, which has reached 9.4% in June, setting a new 40-year high.

L&C Mortgages Associate Director David Hollingworth said: “The mortgage landscape continues to rapidly evolve as lenders balance financing terms and volatile service levels, necessitating frequent changes to mortgage products.

“As a result, mortgage borrowers are facing increased payments, whether due to the increase in base rates or the end of protection on their current fixed contract.

“As borrowers brace for another base rate hike this week, many are unsurprisingly looking for shelter from a fixed rate. This offers monthly savings as well as payment security for households that are already feeling the pinch of further increases in the cost of living.

“Removing the Bank’s stress test might give lenders a bit more flexibility, but it can only help them counter the rising cost of living that will inevitably weigh on affordability.

“Finding the right mix of rates, fees and criteria will be crucial in finding the right option to help manage what will typically be the biggest outflow.”

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