Some average fixed mortgage rates have climbed to their highest level in weeks or months, as lenders respond to changing market conditions. The average two-year fixed-rate homeowner mortgage on the market on Monday morning was 5.63%, up 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 Bank reported a 0.4% annual drop in average UK house prices to £298,468 in August – the first year-on-year fall since November 2023. Prices also slipped 0.2% on the month, following a 0.1% decrease in July.
Lloyds said it expects the market to remain fairly subdued in the months ahead, adding that this will likely have only a limited impact on house prices.
Andrew Asaam, mortgages director at Lloyds, said: “The housing market has faced a more difficult backdrop in recent months, with the impact of global events on inflation and borrowing costs creating greater economic uncertainty. What we’re not seeing is a rush of homeowners cutting prices.
“But more are choosing to sit tight, with sellers reluctant to accept offers they feel are too low, while some buyers are waiting to see how conditions develop.
“Average house prices remain around 25% higher than they were at the end of 2019, despite the substantial increase to interest rates seen over recent years.”
He added: “While affordability remains a challenge, wages continue to grow and employment has held up better than many anticipated. This will help to support demand from those who need or want to move.”
