The Bank of England base rate has recently risen from 4.25% to 4.5%, and this could have an effect on your finances. The average five-year mortgage rate in the United Kingdom is currently 4.79%, based on 75% of the loan-to-value (LTV) ratio. The average two-year mortgage rate is 5.09%, also based on 75% of the LTV. Forbes Advisor's editorial team is independent and objective, and to support our reporting work, we receive payments from companies that advertise on our site.
This comes from two main sources: paid locations for advertisers to submit their offers, and payments we receive for those locations, which affect how and where advertisers' offers appear on the site. This site does not include all companies or products available in the market. According to our mortgage partner, Better, Co, UK, the average cost of a two-year fixed-rate mortgage is 4.74%. The average costs of a three-year offer are 4.59%, while a typical five-year offer today is priced at 4.39%.
Better, co, UK states that the most competitive offers are 3.88% for a fixed term of two years, 4.10% for a term of three years and 3.93% for a term of five years. The best 10-year fixed rate stands at 4.39%. The average two-year follow-up rate today stands at 4.82%, compared to the leading offer of this type, which is priced at 4.49%. So what does rising interest rates mean for the cost of mortgages so far? The approximately 1.4 million homeowners (according to UK Finance) who use variable interest rate transactions, such as base rate trackers, will experience an almost immediate increase in their monthly repayments after the last rise in the bank rate to 4.50%.
You can calculate the monthly cost of a mortgage with different interest rates with our mortgage calculator. Halifax's latest house price report showed that annual house price inflation slowed to 0.1% in April, compared to 1.6% in March. This means that average property prices in the United Kingdom (£286.89) are similar to the level they were at this time last year. Nationwide reported that prices fell 2.7% in the 12 months leading up to April, but rose 0.5% month-on-month - this is the first monthly increase in more than six months and has led some commentators to suggest that the market has stabilized. The real estate portal Rightmove states that the average cost of a home offered for sale in April now stands at 366,247 pounds sterling, 1.7% more than last year, but only 0.2% more than last month. The Bank's Monetary Policy Committee (MPC) uses interest increases as a means to cool the economy and control the increase in inflation. The Consumer Price Index (CPI) inflation measure fell to 10.1% in the 12 months prior to March, above the 9.8% expected by analysts, largely due to rising costs in the food sector. However, instead, the government's own Energy Price Guarantee (EPG) applies, which was implemented to protect homes from skyrocketing energy costs - currently, the EPG is set at 2,500 pounds sterling per year. Originally, the EPG was due to increase to 3,000 pounds sterling starting April 1st, but the government confirmed on the eve of its March budget that the 2500 pound limit will apply for three more months - from April to June. With rising bank rates, keeping track of mortgage costs is a challenge - especially when rates change and deals can be closed on a daily basis - but an easy way is to use our mortgage tables powered by Better, co, uk. Mortgage offers that offer the cheapest rates generally come with fees attached - you can choose to pay them in advance or add them to your loan - and you can take into account these fees by sorting results by “cost of initial period” (in the “Sorted by” drop-down menu).
The cheaper ones are reserved for larger deposits - usually 60% of property value or more - and you'll need sufficient income and a clean credit history to be accepted for a mortgage. Once issued, mortgage offers are usually valid for six months - although some lenders accept offers for up to 12 months - so if you're thinking of remortgaging your current home you can set a rate today with no cost or strings attached. Opting for a short-term fixed-rate mortgage means you'll have to maintain that rate for a shorter time and it'll be easier to switch mortgages when rates fall - when your fixed period ends your rate will switch to HSBC's standard variable rate unless it changes. However if you change this will have an impact on your mortgage payments if you have a mortgage linked to this rate - you will have an annual overpayment allowance for fixed-rate mortgages equivalent to 10% of your outstanding mortgage balance. Last month, Coventry Building Society offered some of the best 3-year mortgage rates in the United Kingdom at 4.11%. You can only guarantee your rate once you have submitted your mortgage application and paid any charges in advance. Think of a variable-rate mortgage as a follow-up offer that will immediately benefit from a drop in base rate but keep in mind that it works both ways so if rates rise you'll end up with higher monthly repayments. During this period of low rates 5-year fixed mortgages became most popular option with about 70%.