Fixed Rate  

Low mortgage rates come to an end as costs increase

Low mortgage rates come to an end as costs increase

The past three months has seen increases in the cost of the majority of mainstream mortgage products, product data analysis from Mortgage Brain revealed.

Mortgage Brain’s product data – as of 1 January 2017 – showed that the cost of a two-year tracker with a 90 per cent loan-to-value (LTV) has gone up by 8 per cent over the past three months. 

Similarly, a 90 per cent LTV two-year fixed rate now costs 5 per cent more than it did in October 2016.

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Marginal increases of around 1 per cent over the past quarter have also been recorded for 60 per cent LTV two-year tracker and fixed rate mortgages, a 60 per cent LTV three and five-year fixed rate, and a 2 per cent increase for a 90 per cent LTV three-year fixed rate mortgage.

In monetary terms, the 8 per cent increase for the 90 per cent two-year tracker equates to an annualised increase of £576 on a £150,000 mortgage, and a £342 annualised increase for the 90 per cent two-year fixed rate product.

There is still some good news for borrowers, however, with Mortgage Brain’s latest data showing that the cost of the lowest rate five-year tracker (60 per cent LTV) is now 18 per cent less than it was three months ago.

With a current rate of 1.79 per cent, the reduction in cost for this product equates to a potential annualised saving of £1,674.

Mark Lofthouse, chief executive of Mortgage Brain, said: “It is perhaps still a little too early to predict that mortgage rates are rising and that this trend will continue. 

“However, our latest analysis is starting to show signs that we may finally be moving away from the long period of record lows in terms of mortgage rates and costs to a period of stability, or potentially, rises.”

Jeremy Duncombe, director of Legal & General Mortgage Club, said the cost of Swap rates has increased over the last month, particularly for two-year rates, which would traditionally be passed on to customers in the form of increased fixed rates.

Mr Duncombe said the market is, however, very competitive at the moment as lenders return from the festive period with a new year ahead of them.

He said: “What this shows is the volatility of the market, and the fact that fixed rates are not necessarily linked to bank base rate. 

“Brokers should use this uncertainty as a great opportunity to talk to their customers to ensure they are on the best possible product for their circumstances.”

emma.hughes@ft.com