Average mortgage rates hit highs in 2023 but now on ‘gentle downward trajectory’ – Moneyfacts

Mortgage rates and product availability fluctuated significantly this year but pricing has started to come down and options have returned, with this expected to continue into 2024, research has shown.

According to Moneyfacts’ year in review for mortgages, on the residential side, the average rate for a two-year fix peaked at 6.86 per cent in July. The last time the average two-year fixed rate was this high in August 2008 when it reached 6.94 per cent.

Sub-five per cent two-year fixed rates across the UK disappeared from the market for a few months this year, but returned to the market in November with Nationwide’s 60 per cent loan to value (LTV) product at 4.99 per cent.

Average five-year fixed rates peaked at 6.37 per cent in early August but dropped below sub-six per cent by late September.

The lowest product availability was seen at the start of the year with just 3,643 deals available.

There was “turbulence and mass withdrawals at times of high volatility” but the market rebounded to nearly 5,900 products in late November, the highest number in 15 years.

Buy-to-let pricing and product avilablity improving

Within the buy-to-let sector, the average rate for a two-year fix hit a high of 6.97 per cent between 24 and 26 July this year. This is the highest since Moneyfacts’ records began in October 2011.

Five-year fixed rates hit an average of 6.82 per cent from 21 and 25 July, again the highest on Moneyfacts’ records.

Product availability has improved significantly, with just 1,906 deals available at the start of the year, rising to 2,982 in November.

Standard variable rate highest since 2007 and equity release ticking down

Moneyfacts found that the average standard variable rate (SVR) on residential mortgages rate came to 8.19 per cent in November and has remained at that figure into December.

This figure on 1 December is the highest on Moneyfacts’ records, which goes back to July 2007.

On the equity release side, the average rate came to 7.33 per cent on 1 November, which is the third-highest level on Moneyfacts’ records which go back to November 2007.

Average equity release rates reached their apex of 8.13 per cent in November 2022, having been at 7.54 per cent the previous month.

James Hyde, spokesperson at Moneyfactscompare.co.uk, said: “A cocktail of several factors led to mortgage rates rising to recent highs this year.

“Average rates shot up in the aftermath of the 2022 fiscal announcement, but the impact of 14 consecutive base rate rises and stubbornly high inflation ensured the situation remained significant in 2023.”

He added: “June’s 0.5 per cent base rate rise, coupled with consistently high inflation, produced dramatic rises in mortgage pricing. For example, the average two-year fixed rate rose from 5.49 per cent on 1 June to 6.39 per cent on 1 July.

“Average fixed rates peaked around a month later, with two-year fixes reaching a high of 6.86 per cent in late July, and five-year equivalents hitting 6.37 per cent in early August.”

“While the volatility has calmed in recent months and rates are on a gentle downward trajectory at present, any further rise in base rate or swap rates may lead to a reversal. It remains to be seen where rates will eventually settle, as the Bank of England attempts to bring inflation down to two per cent by early 2025.”

Anna is a reporter for Mortgage Solutions and assistant editor for Specialist Lending Solutions, both B2B sister titles of YourMoney.com. She has worked as a journalist for over four years, initially in the specialty insurance sector before moving onto mortgages.