Inflation defied expectations to remain in double figures last week prompting economists to U-turn and predict another interest rate increase next month, from 4.25% to 4.5%.
But while the hike in inflation is concerning for mortgage holders or those looking to take out a home loan, the impact on the market has so far been minimal, with average rates actually dropping over the past week.
The average two-year fixed is currently 5.24%, according to Moneyfacts – down slightly from 5.27% a week ago.
For five-year fixed Moneyfacts says it is 4.96% – another slight drop from 4.98%.
Matt Smith, of Rightmove, which also provides regular mortgage market updates, said: “Despite the challenges posed by the unexpected news that inflation remains stubbornly high, which is impacting the underlying funding costs of fixed-rate mortgages, the resilience of lenders and desire to compete for business has seen average rates for mortgage products continue to fall this week across most Loan-to-Value (LTV) ranges, albeit at a much slower rate.
“Competition between lenders remains strongest in the traditional first-time-buyer loan-to-value ranges. The biggest fall is in the 90% LTV two-year fixed rate product range, which has dropped by 0.4% this week.
“However, there are signs that lenders are facing increasing pricing pressures, as we have seen an increase in 95% LTV 5-year fixed rates. This is in part due to the relatively small number of lenders active in this space, which means that the average can be influenced by one or two lenders increasing rates.
“Looking forward, it is likely that we will see lenders continue to try to hold the line on rates as competition remains the focus while they await the next base rate decision on 11 May. Despite this, we could see some rate increases in the meantime.
Rightmove tracks the top table 85% and 60% LTV for a five-year fixed-rate mortgage so you can quickly see the trend at a glance.
Further LTVs for two- and five-year fixed rates are in the tables that follow. All rates are based on products with a circa £999 fee.
| LTV
(loan to value) |
Term
|
Average rate
18th April 2023 |
Average rate
25th April 2023 |
Weekly Change | Average rate
a year ago |
|
85%
|
5 year fixed | 4.46% | 4.45% | -0.01% | 2.73% |
|
60%
|
5 year fixed | 4.13% | 4.12% | -0.01% | 2.47% |
| LTV (loan to value) |
Term
|
Average rate
18th April 2023 |
Average rate
25th April 2023 |
Weekly Change | Average rate
a year ago |
|
95%
|
2 year fixed | 5.48% | 5.48% | 0.00% | 3.15% |
|
95%
|
5 year fixed | 5.04% | 5.10% | +0.06% | 3.44% |
|
90%
|
2 year fixed | 5.08% | 5.04% | -0.04% | 2.71% |
|
90%
|
5 year fixed | 4.69% | 4.67% | -0.02% | 2.91% |
|
LTV (loan to value) |
Term |
Average rate
18th April 2023 |
Average rate
25th April 2023 |
Weekly Change | Average rate
a year ago |
|
85%
|
2 year fixed |
4.83% |
4.81% |
-0.02% |
2.59% |
|
85%
|
5 year fixed
|
4.46% |
4.45% |
-0.01% |
2.73% |
|
75%
|
2 year fixed |
4.56% |
4.54% |
-0.02% |
2.45% |
|
75%
|
5 year fixed
|
4.25% |
4.23% |
-0.02% |
2.52% |
|
60%
|
2 year fixed
|
4.46% |
4.45% |
-0.01% |
2.42% |
|
60%
|
5 year fixed |
4.13% |
4.12% |
-0.01% |
2.47% |
The Rightmove data is provided by specialist mortgage technology provider Podium Solutions
These are only tiny drops. Lenders make their money by charging interest on what they lend. If interest rates get too high people can’t afford to borrow as they can’t make the repayments, this is a disaster to any lender looking to increase their business. So they reduce rates to try to draw customers in. Better to have a smaller slice of pie rather than none at all, but in reality they are only losing a few crumbs from their slice this time and it’s hardly going to stimulate the markets.
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