Mortgage costs have hit a two year high as lenders anticipate the widely expected increase to The Bank of England Base Rate (BoE). The average two year fixed mortgage now has a rate of 2.5 per cent.
Average mortgage rates have increased by 0.25 per cent since March. This follows an increase in lenders rates at the end of 2017, reflecting The Bank of England decision to move its base rate up from 0.25 to 0.5 per cent in November.
Following this announcement by Mark Carney, Governor of The Bank of England back in November, there has been a jump in homeowner activity moving into fixed-rate mortgages to lock in a fixed monthly payment.
Those who have signed up for a fixed term mortgage, of which 57 per cent of borrowers have done so, will not be affected by the rate rise until out of their fixed term. In fact, it’s been reported by the Resolution Foundation that as few as one in ten households will be immediately affected by any rate rise due to a combination of homeownership without a mortgage, the majority of borrowers being tied into a fixed rate and the rise of households renting.
It is believed that a further increase in the base rate could follow at the end of the year, with the BoE committee hinting that 2 per cent is a strong possibility in the short term. This would be equal to an additional £138 per month if you are the average homebuyer with the typical mortgage in the UK of £175,000.
For those who are currently on a variable rate from their lender, it’s advisable to take professional advice as to whether a fixed term rate would be more beneficial.