Remortgage rates jump 2% in 2022: L&C Mortgages



The average of the keenest two-year fixed-rate remortgage deals is now more than 2% higher than at the beginning of the year, according to L&C Mortgages.

Low loan-to-value two and five-year average remortgage rates from the top ten lenders “leapt again” in July, says the mortgage adviser’s Remortgage Tracker.

The average two-year fixed deal climbed by 26 basis points to 3.46% last month, while five-year fixes lifted to 3.50%. In January, these prices stood at 1.34% and 1.55%, respectively.

A borrower taking a typical £150,000 repayment mortgage over 25 years at the average two-year rate now faces monthly payments £159 higher than at the beginning of the year, which adds to an annual increase in payments of more than £,1900 compared to January, the study says.

The advisor adds: “Many borrowers are shopping around well in advance to try and get ahead of further market movement.

“The majority of our customers, 66%, are now applying more than the months before the end of their deal. July saw the highest proportion of customers this year, 22%, apply five to six months before their current deal ends.”

The report says lenders have largely fed the recent base rate increases into their standard variable and reversionary rates, the average top ten rate is now 4.81%.

“The majority of borrowers are unsurprisingly electing to switch to fixed rates to cut their rate and avoid the standard variable rate, as well as protect against the expectation of further rate hikes,” adds the study.

It says that switching from standard variable rates to average two and five-year fixed rates could cut the annual outgoing by more than £1300.

The report adds: “That saving could increase further if the Bank of England continues to raise rates, as many anticipate.”

The study comes as the Bank is widely expected to raise the base rate, by as much as 0.5%, for the sixth time in a row on Thursday.

The Bank has lifted the base rate five times consecutively since December from a historic low of 0.1% to 1.25%, a 13-year high, to combat rising inflation, which hit 9.4% in June, setting a fresh 40-year record.

L&C Mortgages associate director David Hollingworth says: “The mortgage landscape continues to shift rapidly as lenders balance volatile funding conditions and service levels, forcing frequent changes to mortgage products.

“As a result, mortgage borrowers face a rise in payments, whether as a result of base rate increases or as the protection of their current fixed deal comes to an end.

“As borrowers brace for another base rate rise this week many are unsurprisingly seeking the shelter of a fixed rate. That offers monthly savings as well as building in security of payment for households already feeling the pinch from other cost-of-living increases.

“The removal of Bank stress test could give lenders a little more flexibility but this may only help them counter the cost of living rises which will inevitably weigh down on affordability.

“Finding the right combination of rate, fee and criteria will be crucial to find the right option to help manage what will typically be the single biggest outgoing.”