Variable rates drop after base rate cuts — but fixed rates tell a different story
The average interest rate for five-year fixed mortgages in the UK experienced its steepest monthly increase since August 2023, according to the latest Moneyfacts UK Mortgage Trends Treasury Report.
The data also shows a continued gap between two- and five-year fixed rates, with both averages rising in November. The average two-year fixed mortgage rate climbed by 0.13% to 5.52%, while the average five-year fixed rate rose by 0.19% to 5.28%.
Despite the increase, the five-year fixed average remains 0.27% lower than at the start of the year. In contrast, the two-year fixed rate has dropped 0.41% in the same period but remains 0.24% higher than the five-year equivalent — a trend consistent since October 2022.
Meanwhile, the average two-year tracker variable rate fell to 5.46%, while standard variable rates (SVRs) dropped to 7.85%, down from a high of 8.19% recorded in November and December 2023.
Mortgage product availability rose to 6,486 options, marking the largest monthly increase since June 2024. This is also significantly higher than a year ago, when 5,694 products were available.
Deals at the 95% loan-to-value (LTV) tier increased to 365, reaching their highest level since May 2022. Additionally, the average shelf-life of a mortgage product increased to 21 days, up from 17 days last month.
Rachel Springall (pictured), finance expert at Moneyfacts, attributed the rise in fixed mortgage rates to volatile swap rates, which prompted lenders to reprice their products.
“In a somewhat inevitable turn of events, fixed mortgage rates rose month-on-month as lenders rushed to reprice products due to volatile swap rates,” Springall said.
She noted that while two-year fixed rates have dropped more significantly in 2024, five-year fixed rates have been slower to decline, which may be discouraging for borrowers seeking longer-term certainty.
Springall also highlighted that despite recent declines in tracker and SVR rates following the Bank of England’s base rate cut, borrowers paying SVRs are still facing significantly higher costs than those on fixed deals.
“There are estimated to be millions of borrowers who have not yet refixed their mortgage since rates started to rise in 2021, so seeking advice is wise,” she said.
Looking ahead, Springall cautioned that uncertainty around interest rates and inflation could continue to influence mortgage pricing. While a potential for further Bank of England base rate cuts exists, she noted that broader economic factors may delay meaningful reductions in fixed mortgage rates.
“As we move into 2025, it will be interesting to see how lenders will balance supporting their existing customers and enticing new business as the future of interest rates remains unpredictable,” she said.
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