With mortgage rates recently ticked back up again, potential homebuyers — and current homeowners looking to refinance or make other mortgage-related moves — are considering what’s next. According to Moneyfacts, the average rate for a two-year fixed-rate mortgage has now reached 4.98%. By comparison, the average rate of a five-year fixed-rate mortgage is slightly higher at 5.02%. This is the first week of increases in average mortgage rates since February. Lenders are already taking a more conservative stance as they prepare for the upcoming winter season.
Rachel Springall, a finance expert at Moneyfacts, noted that the average two-year fixed deal was 6.67% just two years ago. This is a huge drop from historical levels. She said the latest climb of 0.02 percentage points month-over-month would probably have borrowers feeling discouraged. They are holding out for something better.
Since more than 80% of mortgage borrowers have fixed-rate contracts, this stability allows their counterparty interest rates to remain fixed until their contracts mature, typically in two or five years. When thinking about these larger trends, Springall said to always keep in mind your own situation. He advised borrowers to get advice when grappling with the maze of mortgage choices.
“Volatile swap rates and a cautionary approach among lenders have led to an abrupt halt in consecutive monthly average rate falls,” said Springall. This kind of volatility is indicative of the current financial climate, leaving lenders with little choice other than to take a more cautious approach.
Simon Gammon, managing partner at mortgage advisers Knight Frank Finance, echoed the need to get to grasps with what is happening in today’s market. He stressed the importance of potential buyers doing their own financial math. Making hasty moves due to what was felt in the market can be dangerous.
Hundreds of thousands of potential first-time buyers are hopeful of securing a place of their own amid these fluctuating rates. Countless others lack the tools necessary to succeed in this market environment. This is particularly the case for homeowners who have grown accustomed to the much lower rates of the 2010s.