While the average two-year fixed mortgage rate has experienced an increase across all LTVs in the past month, 95% LTV rates have been the hardest hit with a 0.10% increase from September, according to Moneyfacts data.
This compares to a 0.03% increase in the average rate at 60% LTV, which now stands at 1.69% compared to 4.26% at 90% LTV.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “This is disappointing news especially considering these borrowers could potentially have to factor in another rate increase if base rate rises as speculated.
“Many first-time buyers will be frustrated by the news that rates are rising while base rate has yet to do so. However, it goes to show that we don’t necessarily need to see a base rate rise for interest rates to increase.
“With interest SWAP rates rising following intense speculation about an imminent base rate rise, many providers are starting to factor in the extra cost. At 95% LTV, providers have an added element of risk if base rate does go up, as the probability of borrowers defaulting on their mortgage could increase. This needs to be factored in.
“When comparing the increases at 60% LTV to those at 95% LTV, the difference is stark. Providers are looking to remain competitive to those remortgaging and protect their mortgage books in the event of a rate rise, which is why rate rises at lower LTVs are being kept to a minimum.”
Sourced From: Financial Reporter