The average two year fixed rate increased on 14 or 70% of the 20 business days in April and fell just three times, according to research from Moneyfacts.
Anyone applying for a two year fixed loan on 01 April would have been offered an average rate of 3.52%, but by 30 April it would have risen to 3.61%, or an additional £290.88 over the term for a mortgage of £250,000.
At the same time, the firm says that SWAP markets have been volatile, rising and falling weekly, in a response to continual speculation of when Bank of England base rate will rise.
The tight correlation between the two year fixed rate and two year SWAP rate suggests that there is little ability in the mortgage rates charged for the banks to absorb the increased cost to them of borrowing money.
‘It is a very different mortgage market to four months ago when the government withdrew its controversial Funding for Lending Scheme, thereby cutting access to cheap money. Banks are facing scrutiny over balance sheets via stress tests and capital holding requirements, plus there are increased costs of regulation and processes such as the MMR mortgage regulations,’ said Sylvia Waycot , editor of Moneyfacts.
‘The two year fixed rate mortgage has been the favoured option for the risk averse borrower who enjoys the knowledge that they know what their mortgage will cost each month. However, as these deals have come to an end, many borrowers have reverted to the SVR of their lender, as in many cases it has proved a cheaper alternative,’ she explained.
‘However, the average two year fixed rate increased 14 of the 20 business days in April and the average five year fixed rates have fared no better, increasing 15 out of 20 working days in April,’ she pointed out.
People should not make the mistake of thinking that we need a change to base rate to increase the cost of mortgages, as prices are creeping upwards now. So if fixed rates are your preference, now is the time to fix,’ she added.
