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Are we on track for seven per cent two-year fixed rates?

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 15. July 2023

Interested in speaking to brokers about whether we could reach an average two-year fixed rate of seven per cent and what impact that could have on the market. 

According to Moneyfacts figures today,the average 2-year fixed residential mortgage rate today is 6.78%. This is up from an average rate of 6.75% on the previous working day.

The average 5-year fixed residential mortgage rate today is 6.30%. This is up from an average rate of 6.27% on the previous working day.

  • Could two-year fixed rates hit seven per cent? 
  • What impact would that have on the market?
  • What would you like to see from lenders/governments/trade bodies?
     

3 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
Anything is possible in the short term, we are just going through yet another wave of rate increases across the market, so there will be someone with the honour of the first mainstream 7% deal very soon. For many, that will be their glass ceiling moment, and we may see quite a dynamic change within the market. Buyers will likely baulk at that level of fixed rate, which will accelerate the property market demise. The only saving grace may be improved inflation figures, better than market expectations, when announced next week. If we can get SWAPs continuing to improve, as they have over the last couple of days, we have a chance of peaking before the dreaded 7% comes along...
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Elliott Culley
Director at Switch Mortgage Finance
If the Bank of England remains on the same course then it is likely two year fixed rates will increase to 7% for some mortgages. If we see signs the Bank of England's rate increases impact the economy and inflation then it may be we see a cooling off in rates. The latest data showed the economy shrunk by 0.1% in May. This could be early shoots that the actions of the Bank of England's actions are making the desired impact. As a result, we saw swaps reduce ever so slightly. If further data backs up what we have seen then the Bank of England may not need to take rates as high as forecast which could help mortgage rates.
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Russell Maggs
Mortgage & Protection Adviser at Maggs Financial Services
Quoting average fixed rates does nothing but instil fear in the consumer. We should be quoting an average of the best 20 deals at each LTV bracket to give a realistic expectation of what most of the population will end up paying. If average interest rates hit 7% then there would likely still be deals at 6% available.

I would like to see mortgage lenders having to commit to not charging clients more than the standard variable rate quoted at the point of application during their entire term. If they are happy to stress test payments at that level, they should ensure consumers do not have to pay more than this amount in the future should markets change.