Research from Moneyfacts' latest UK Mortgage Trends report shows that the run of record low mortgage rates has come to an end, as after more than a year of continual rate cuts, the average two and five-year fixed rates have increased for the first time in 13 months.
The average two-year rate rose by 0.04% this month, up from 2.68% in August to 2.72% today - the first time an increase has been recorded since last August. This pattern is mirrored in the five-year sector: the average five-year rate also rose by 0.04% this month to stand at 3.28%, again marking the first rise since August 2014.
The ongoing speculation over the base rate has given providers no option but to start increasing rates. In all likelihood, average rates reached their final low point last month, and they're largely expected to continue rising for the foreseeable future.
Growing incentive to remortgage
The report revealed further incentive for borrowers to remortgage, with the gap between the current SVR and the average mortgage rate of two years ago now standing at 1.37%. This margin rose by 0.32% in recent months - in April and May this year, the difference stood at 1.05% - meaning that borrowers sitting on their SVR or approaching the end of a fixed rate term will now have significant motivation to remortgage.
It seems that many borrowers are taking action as a result, with latest statistics from the British Bankers' Association showing a significant uplift in remortgaging activity in July, with mortgage approval volumes being up almost 29% year-on-year. This trend is expected to continue for the foreseeable future, as unless the average SVR drops considerably, the differential between it and mortgage rates of two years ago will only increase further.comments powered by Disqus