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Fixed rate mortgages are starting to rise in cost

Christina Hoghton
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Christina Hoghton

It could make sense to lock into a competitive fixed rate mortgage before they move higher

Fixed rate mortgages are rising, following four months of falls, said Moneyfacts.

The financial information provider said that average two- and five-year fixed rates are up by 0.04% month-on-month, to 2.29% and 2.59% respectively.

The good news is that, despite the rise, both are still lower than a year ago. But they are moving in the wrong direction.

Why are rates rising again?

The rises were fuelled by mortgage rate increases for borrowers with substantial deposits, said Moneyfacts. It recorded the most significant repricing in the 65% loan-to-value bracket (for those with a 35% deposit), where the two- and five-year fixed averages went up by 0.39% and 0.38%, to 2.50% and 2.70% respectively.

Eleanor Williams, finance expert at Moneyfacts, said: “Recent competition in the mortgage sector saw the launch of record-low initial rates as providers competed for predominantly low risk business from borrowers with higher deposits or levels of equity and which saw average rates reduce.

However, the start of November marks a reverse in the average rate cut trend.

“As the market remains unsettled, borrowers may consider this an opportune time to explore securing a new deal, as there is no guarantee that rates will not continue to increase in the months to come. Seeking out independent financial advice to assess the changing market is vital to ensure the best possible deal can be secured considering the rate, associated fees and incentives.”