Home buyers warned as mortgage rates continue to rise

Home buyers looking for a long-term fixed mortgage should be aware that rates are on the rise.

The average 10-year fixed mortgage rate stood at a record low of 2.96% at the start of February.

But financial services company Moneyfacts reports that the typical rate is now 3.05% - up 0.09%.

While it's still lower than the average of 3.2% seen last February, it's starting to head in that direction, warns Moneyfacts finance expert Rachel Springall.

"Lenders appear to be remaining competitive to catch the eyes of consumers looking to remortgage or buy a home.

"However, it's unavoidable that lenders will have to start pricing in fluctuations in long-term swap rates and adjust their range to cope with the changing economy."

Act sooner rather than later

Moneyfacts says that's why anyone looking to remortgage to any kind of lower mortgage rate should act sooner rather than later, with the next base rate rise predicted as early as May. 

But it warns that a 10-year fixed mortgage isn't without its dangers.

Rachel explains that anyone who's interested in a long-term agreement would "need to feel pretty certain that their circumstances won't change and that they will not need to amend their deal, as the redemption charges that apply to most 10-year fixed mortgages can be quite hefty".

If you're not sure how your next 10 years are going to look, Moneyfacts says you could look for a top five-year fixed mortgage instead, as these tend to offer cheaper rates for half a decade of repayment security.

Rachel adds: "Whatever borrowers decide to do, they could benefit from working out the true cost of any deal.

"If possible, they could take the low interest-rate environment as an opportunity to overpay on their mortgage to raise the equity in their home and reduce the term of the loan."

Mortgage experts