The cheapest mortgage rates ever recorded have allowed homeowners to benefit from the downturn in the rate of the housing market.
But the era of ultra-low deals could be closer to coming to an end – particularly for borrowers with larger deposits.
Data analysts Moneyfacts have found that the cost of an average 2-year agreement for homeowners who deposit a $35 per cent is at its highest level in eight years.
While Ahile rates are cheaper than November last year, experts warn that they can still rise if Bank of England increases the base rate.
For the first time in four month, average mortgage rates rose.
The last month’s mortgage price war ended amid speculations that the Bank of England might raise interest rates to stop spiralling house prices.
The base rate was remained at 0.1% during the event. But banks and building societies have been pulling their cheapest offers at an astonishing pace – and this in turn has pushed up the overall cost of two and five-year deals.
A typical two-year fixed rate for borrowers with at least 35 per cent equity in their home is now 2.5 per cent – up from 2.11 per cent just last month and 1.99 per cent two years ago.
Moneyfacts says this rate is the highest for borrowers with this borrowing bracket over the past two years.
Also, the average 5-year bracket deal has risen to 2.2% from 2.32 percent in October and 2.18 November 2019, respectively.
The record-breakingly low mortgage rates that borrowers who have larger deposits saw drop to record levels as banks competed for customers.
But this left lenders little wriggle room to absorb rising costs – so these rates are now rising faster.
Those with smaller deposits already pay higher rates because they are viewed as riskier – so it will take longer for rate rises to filter through.
Data analysts at Moneyfacts have found that the cost of a two-year agreement for homeowners who deposit a $35 per cent is currently eight years high.
The cost of first time buyers with deposits below 5% have seen their expenses fall over the past month.
According to them, the average two year deal is now at its lowest price since February 2013
The average rate dropped from 3.32 percent in October to 3.22 percent in November. It also fell from 3.63 to 3.51 percent for a 5-year contract.
Since the initial lockdown, when lenders offered loans to more risky borrowers, there have been over 5,000 mortgage offers.
Over the past month, average five-year contracts have increased 0.04 percentage point to 2.29 Percent and 2.59 Percent respectively.
Although rates are lower than November last year, experts caution that rates could rise if Bank of England increases the base rate.
Eleanor Williams, of Moneyfacts, said: ‘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.’