Fixed mortgage rates jump with ‘more moves expected in coming days’

Some average fixed mortgage rates have increased to reach their highest level in weeks or months, as lenders respond to changing market conditions, according to a financial information website.

The average two-year fixed homeowner mortgage rate on the market on Monday morning was 5.63%, jumping from 5.60% on Friday, Moneyfacts said.

It is the highest rate recorded by Moneyfacts since August 10.

The average five-year fixed homeowner mortgage rate on Monday morning was 5.68%, increasing from 5.64% on Friday.

This was the highest average rate since May 11, Moneyfacts said.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, highlighted inflationary concerns stemming from the conflict in the Middle East.

She said: “The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates.”

She added: “The recent uplift in swap rates has started to filter into the pricing of fixed-rate mortgages, with more moves expected in the coming days.

“Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages.

“Lenders look at margins very carefully, so it would be unwise to price their deals too low, if the expectations are for interest rates to rise, even if over the short-term.”

However, Ms Springall added that the impact on the mortgage market in recent days “pales in comparison to when the conflict in the Middle East began,” when many lenders pulled fixed-rate deals.

Moneyfacts’ figures were released as Lloyds said on Monday that the average UK house price fell annually in August, marking the first year-on-year decrease since November 2023.

A 0.4% average annual drop in property values was recorded by Lloyds in August.

House prices also fell by 0.2% on a monthly basis, following a 0.1% decrease in July.

Lloyds said it expects the market to remain fairly subdued in the months ahead, although it added that this will likely only have a limited impact on house prices.