What the series measures
This is the Bank of England's average quoted interest rate on a two-year fixed-rate mortgage at 75% loan to value (LTV), series IUMBV34 in its database. A quoted rate is an advertised one: the rate a lender offers on a product anyone meeting its criteria can apply for, not the rate on loans actually made. Because it holds the product and the deposit fixed, it is a clean benchmark for what a new fixed mortgage costs from one month to the next.
Loan to value is the loan as a percentage of the property's value, so 75% LTV means a deposit, or equity if you are remortgaging, of 25%. The Bank publishes the same measure at 60%, 85%, 90% and 95% LTV, and for three-year, five-year and ten-year fixes, in its table of quoted household interest rates. Rates rise with LTV because a smaller deposit leaves the lender more exposed if prices fall.
Who compiles it and how
The Bank takes advertised rates from the independent data service Moneyfacts and averages them across UK banks and building societies, weighting each lender by its share of business. Its notes on the quoted rates data set out the rules:
- A lender counts only if it advertises a product that closely fits the definition. A fix of 21 to 27 months counts as two years.
- Only products available to most borrowers are used; deals restricted to first-time buyers are left out.
- No average is published for a month with fewer than three lenders in the sample.
The method has changed over the years. Up to early 2019 the rate was the one on offer at the end of each month, from a sample of lenders that report to the Bank; since then it is the average over the month, across the whole market. The Bank also revised the method in January 2008, applying the change back to 2005, and again in January 2016.
What it includes and leaves out
The figure is the headline interest rate, not the APR. Arrangement fees and cashback are not added into it. They are used in choosing which of a lender's products goes into the average: the Bank works out each product's cost including fees on a loan of £185,000 over the fixed period and takes the most competitive, then records that product's advertised rate. So the series tracks rates on deals with whatever fee made them cheapest, and a low rate with a large fee and a higher rate with none are not distinguished.
It also says nothing about what you pay after the two years. When the fix ends, a mortgage moves to the lender's standard variable rate unless you take a new deal.
How to compare it with your quote
Treat the series as a benchmark for the market, not an offer. Your own quote can differ because of your LTV, your credit record, the property, the loan size and whether a broker found a deal not advertised to everyone.
Compare the total cost over the two years, not the rate alone. Add the product fee to the interest you would pay over the fix, or ask for the cost over the deal period, and do the same for each offer. A large fee matters more on a small loan, because it is spread over less borrowing. The mortgage calculator shows the monthly payment at any rate; run it at your quoted rate and at the benchmark to see what the gap costs. The rent vs buy calculator takes the same rate.
Fixed rates move before Bank Rate does, because lenders price a two-year fix on where they expect rates to be over those two years. Read this series with Bank Rate and with the effective rate on new mortgages, the rate borrowers are actually paying on loans drawn each month.
Reading the chart and the table
Each point is one month, dated the first of the month; the Bank's database dates the same figure on the month's last day. The table summarises the months by calendar year. Values are as the Bank publishes them, to two decimal places, and the series begins in January 1995.