Average fixed mortgage rates hit their lowest prices in six months
Fixed mortgage rates hit their lowest level in six months – but real estate deals are still low as buyers grapple with higher costs
- Mortgage interest rates rose at the end of last year and are still high despite a six-month lull
- This leaves many homeowners with a shock when existing fixed rate deals end
Average fixed-rate mortgage costs hit a six-month low, but real estate transactions are still down due to buyers’ weather much higher mortgage payments.
Both the average two-year fixed-rate and average five-year mortgage rates fell for the fourth month in a row, according to financial experts Moneyfacts.
The average two-year fixed-rate mortgage is now 5.32 percent, with the average five-year fixed-rate mortgage at 5 percent.
In March 2022, the average was 2.65 percent for a two-year fix and 2.88 percent for a five-year fix
Big dipper: Fixed mortgage rates are expected to fall between 4% and 5% this year after rising late last year
Meanwhile, despite rates falling from their peak, the last time the average two-year fixed rate was this far above the five-year rate was 15 years ago in February 2008 – 0.36 percent difference compared to the current 0.32 per cent.
In the aftermath of the disastrous mini-budget in September 2022, mortgage rates rose rapidly as the cost of borrowing skyrocketed.
These rates have been falling since the beginning of the year and are expected to be between 4 and 5 percent by 2023.
But rates are still significantly higher than they were a year or two ago, leaving many homeowners with a mortgage shock when their fixed-rate deal comes to an end.
Currently, there are a number of fixed deals on the market for less than 4 percent interest per annum.
Lloyds is currently offering a five-year fixed deal at 3.94 percent. Halifax has a 3.99 percent deal for the same term.
In March 2021, the average two-year fixed interest rate was 2.57 percent and the five-year average interest rate was 2.75 percent.
This means that someone with a £200,000 mortgage taking out a new two-year fixed rate would see their monthly payments increase by £303, from £904 to £1,207.
Housing transactions are disappointing
At the same time, property activity fell 18 percent in February compared to the same period last year, with 76,920 residential transactions recorded during the month, according to the latest figures from HM Revenue & Customs.
Experts suggest that the rise in mortgage prices at the end of last year gave buyers food for thought and carried over into last month’s activity.
Jackson-Stops estate agent Nick Leeming said: ‘Nearly three years since the UK lockdown began, the housing market is a world away from the property paralysis it once saw.
“Today’s numbers reflect the reticence of homebuyers who followed Liz Truss’s time in power and the effects of the mini-budget that began then. But although the transaction level has cooled down a bit, the real estate market is not slowing down.’
Property transactions fell in February compared to the previous year, but rose slightly on the previous month, according to HM Revenue & Customs figures
However, month-on-month activity in February increased slightly, with 2 percent more transactions than in January.
Tom Bill, head of UK residential research at estate agent Knight Frank, added: ‘Today’s figures underscore the magnitude of the mini budget hangover for the UK housing market.
“February’s drop in turnover should be seen in the context of a housing market that effectively came to a standstill in the last quarter of 2022 and only picked up again after Christmas. For anyone who knows how long it takes to buy a home in the UK, it should come as no surprise if similarly weak numbers come next month.
“Supply and demand have been solid so far this year and sales volumes will eventually catch up against an economic backdrop that is proving to be stronger than expected.”