Fixed rate mortgages below 2% axed from the market as interest rates continue to rise - here's all you need to know

According to MoneySavingExpert.com’s (MSE) Best Buy Tool, the cheapest fixed rate is from AIB, which stands at 2.10% - although this is for residents of Northern Ireland only. The next best fixed rate is from Barclays at 2.11%.

In comparison, in October 2021 there were over 50 mortgage deals available below 1%, with the cheapest fix being 0.84%. This is based on two-year fixed rate mortgages with a loan-to-value of 60%. In addition, there were more than 600 fixed rate mortgages that stood below 2% in January 2022, according to Moneyfacts, a money comparison tool. 

Since then, however, rates have climbed steeply. In March 2022, the cheapest deal was 1.79%. That's equivalent to an extra £800 a year on a £150,000 mortgage. 

And things are likely to get worse. Last week the Bank of England increased base rates to 1% from 0.75% after the Monetary Policy Committee voted in favour of a rise. It was the fourth time in quick succession that the central bank had increased rates after it first lifted them to 0.25% from 0.1% in December last year.

If you're a a homeowner or looking to get your first home, see our Mortgages and Homes guides for more information on getting the best deal. 

Despite the headline rate you may be able to get a cheaper deal elsewhere

Mortgage rates have been at historic lows for a while but have recently increased to rates we've not seen for some time, plus cheap fixes could give you certainty against rates rising in the future. See our What Type of Mortgage to Choose guide for further help on this. 

But it's not just the rate you need to take into account, as any fees and restrictions need to be considered too. When considering everything as a whole, rather than just the fixed rate, you might end up paying less in total. 

The total cost for AIB's fixed rate of 2.10%, for example, stands at £6,261 and Barclays at £6,565. But another one of AIB's offerings with a higher fixed rate of 2.20% actually sits at a cheaper £6,209 for the year once you take into account fees. The cheapest mortgage for the rest of the UK (as AIB is Northern Ireland only) is from TSB, which offers a fixed rate of 2.39% but a total cost of £6,285 a year making it cheaper than Barclays. 

'Rising mortgage rates put more pressure on already-squeezed household budgets'

Helen Saxon, deputy editor at MoneySavingExpert.com, said: "In a historic context, we're still in an era of incredibly low mortgage rates. Before the 2008 financial crash, the base rate was 5%, and that wasn't out of the ordinary. 

"Yet that's no comfort if you need to remortgage now and all rates are much higher than the deal that's ending. Combine that with rising household bills and it means some who would have easily passed affordability checks last time around may be refused a new mortgage offer as it's 'unaffordable'. 

"If you're on your lender's standard variable rate, or you've a mortgage that's in the last six months of the initial, usually two- or five-year, term, check now if you can hedge against future hikes. Many lenders let you lock an offer in three months ahead, and a few six months ahead. 

"For anyone buying a new home or remortgaging soon, a good mortgage broker is worth their weight in gold. They'll be able to match you with the lenders who are more likely to accept you as they have eligibility info not generally available to you as a borrower."