The average five-year fixed rate rose by 0.19% to 5.28% in December, the biggest increase since August last year, data from a product analyst found.
The Moneyfacts UK Mortgage Trends Treasury Report data showed that average two-year fixed rates went up by 0.13% to 5.52% in December.
The firm said since the beginning of the year, when mortgage rates started falling, five-year fixed rates did not drop by as much as their two-year counterparts.
The average two-year fixed rate is 0.52% lower than this time last year, while the average five-year fixed rate has declined by 0.37% over the same period.
Smaller changes were seen across higher-loan-to-value (LTV) bands, with the typical two-year fixed rate at 95% rising from 5.83% to 5.92% month-on-month. The average five-year fixed rate increased from 5.4% to 5.53%.
Last year, these averaged 6.34% and 5.73% respectively.
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At 90% LTV, average rates increased from 5.7% to 5.8% and from 5.24% to 5.4% respectively. A year ago, the typical two-year fixed rate at this tier was 6.01% and the average five-year fixed rate was 6.71%.
Meanwhile, at 60% LTV, the average two-year fixed rate rose from 4.86% to 5.04% and the average five-year fixed rate went from 4.66% to 4.86%.
This is compared to respective rates of 5.59% and 5.2% this time last year.
In December, the average standard variable rate (SVR) fell from 7.95% to 7.85% month-on-month, while the two-year tracker rate decreased from 5.71% to 5.46%, reflecting the 0.25% cut in the base rate.
Rachel Springall, finance expert at Moneyfacts, said: “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. This month, the average five-year fixed rate felt a notable monthly rise, and during 2024, the rate has not fallen as much as its two-year counterpart. This will come as disappointing news to those borrowers who prefer to lock into a deal for the longer term.
“On the other end of the spectrum, both the average two-year tracker rate and SVR fell in the aftermath of the Bank of England base rate cut. However, borrowers would be wise not to stick on their revert rate, as these are still charging much more than their fixed rate counterparts. There are estimated to be millions of borrowers who have not yet re-fixed their mortgage since rates started to rise in 2021, so seeking advice is wise. Those who locked into a five-year fixed deal back in 2019 on average would have been charged 2.74%, but that rate has almost doubled, now 5.28%.”
More products on the market and for longer
In December, the number of available mortgage products increased, as did the average length of time they were available.
The average shelf life of a mortgage came to 21 days during the month, up from 17 in November and 15 in June. This was also higher than average of 17 days in both December last year and the year before.
The product count at 95% LTV rose from 358 to 365, while there were 762 90% LTV options in December, up from 748 a month ago.
There were 778 deals at 60% LTV, a rise from 758 in November,
In total, there were 6,486 mortgages on the market in December, more than the 6,402 available last month and the 5,694 deals last year. However, this was down from 6,629 products in June.
Springall added: “One positive outcome of November was a slight uptick in product availability and a calming in the average shelf life of a mortgage, which rose from 17 days to 21 days. This indicates that lenders are not re-pricing or pulling deals as aggressively as they were during October. However, lenders will now need to grapple with any future uncertainty surrounding interest rate pricing while aiming to hit any year-end targets. Borrowers will hope that mortgage rates will drop next year, and while there is speculation over multiple cuts to the Bank of England base rate, stubborn inflation can delay such decisions. In addition, the present market proves that a base rate cut does not always mean fixed mortgage rates will immediately fall if there are other economic challenges in play for lenders to consider.
“First-time buyers may well be struggling to amass a large-enough deposit to get their foot onto the property ladder, but in good news, the number of deals at 95% loan to value now stands at its highest point in over two years. However, the market could always do with more product innovation to help those struggling to get a mortgage.”
She said: “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.”
