Re engagement header imageInterest rates on both fixed and variable mortgages increased following December’s base interest rate rise from the Bank of England, analysis has found.

Following the Bank’s decision to increase the base rate from 0.1% to 0.25% just before Christmas lenders have increased interest rates across their mortgage ranges, leading consumers to wonder if now is the time to fix in at lower rates.

Whilst customers on tracker and variable mortgages will expect the increase due to the nature of their products, customers looking to secure new fixed mortgages may be surprised to find these have become more expensive.

According to analysis from Moneyfacts the average two year fixed rate mortgage rose by 0.04% in January 2022 compared to December 2021, whilst the average five year fixed rate mortgage rose 0.02%.

Though the rises are marginal they come at a time of great financial uncertainty for many households in the UK, with a cost of living crisis driven by soaring energy bills meaning the news is unwelcome for many trying to keep expenses down.

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In addition there is increased speculation that further rate rises from the Bank of England are on the cards, possibly as soon as February, which would see mortgage rates increase again.

Moneyfacts finance expert Eleanor Williams said: “With the potential for the Bank of England to apply further increases to the base rate in the coming months, there is no guarantee that the cost of borrowing on mortgages will not continue to rise overall.”

“As the threat of rising inflation and potential for the cost of living continues to rise and squeeze household budgets even more, there may be borrowers prompted to act sooner than perhaps they might have planned to in considering securing a new mortgage deal.”

There was some good news in the analysis for one portion of the mortgage market though, as rates for those with 5% deposits were found to have dropped for the ninth month in a row.

This is particularly good news for the likes of first time buyers with small deposits, some of whom may be using the government’s guarantee scheme to access 95% loan-to-value mortgages.

If you are a first time buyer or are looking to purchase a new property Your Mortgage People can help with £200 cashback* available on completion of a new purchase mortgage arranged through us.

To get qualified advice on your options, lock in at today’s low rates and be protected from future price hikes request a callback from one of our advisors by clicking below.


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