The average homeowner with a typical loan of £175,000 is now paying £44 per month more than this time last year
The average two-year fixed mortgage rate has now hit 2.5%, the highest level since July 2016.
Rates on the most popular mortgage deals have reached their highest levels in two years as providers increase prices in advance of an expected interest rate rise next month.
The average mortgage rate has gone up by 0.25 percentage points since last month. This follows a previous mortgage rate rise by lenders around November 2017 when the base rate moved up by a quarter of a per cent. The average two-year fixed mortgage rate has now reached 2.5% – the highest level since July 2016.
It is predicted that the Bank of England’s monetary policy committee will increase the base rate further from 0.5% to 0.75% at its meeting next month and many lenders are increasing the cost of mortgages in advance.
“The mortgage market is experiencing a period of upheaval, with rates that were once at all-time lows now starting to rise,” said Charlotte Nelson from financial data provider Moneyfacts.
The two increases mean that the cost of paying back a mortgage for an average homeowner with a typical loan of £175,000 is now £44 per month more than it was last autumn.
The Bank of England governor, Mark Carney, announced in November that rates were to rise for the first time in a decade, prompting a flurry of activity among homeowners who moved to fix their rates and lock in monthly repayments.
Research by comparison site uSwitch has found that many lenders have been increasing their rates in recent months, among them Barclays, which changed 60 products.
“Average mortgage rates have spiked at various points in the past few years, but this recent jump could be just the beginning as providers prepare for the expected base rate rise in May,” said Tashema Jackson of uSwitch. “Banks are saying that ‘market conditions’ are driving these rises, so we can expect others to follow suit in the coming weeks and months.”
It is expected that the Bank of England will raise rates twice more by 2020 but Carney has indicated that expectations of a rise next month could be overblown.
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