Many borrowers across the UK are being left in financial turmoil as mortgage rates keep rising due to lenders changing deals. The rates on new fixed-rate mortgages continue to climb on the back of a series of interest rate hikes from the Bank of England. Since the end of last year, the base rate has gone from record lows of 0.1% to 2.25% this September, following a bumper 0.5% increase. The average two-year fixed-rate mortgage has increased from 2.34% to 6% in the same period.
This week saw the nation’s biggest mortgage lender, Halifax, increase its mortgage rates on various deals for new borrowers. Some of these deals now come with interest rates of more than 5%, and industry experts have said that lenders are taking these steps to protect themselves during the ongoing economic uncertainty.
Availability of mortgage products picking up
Following the recent mini-budget from the chancellor, Kwasi Kwarteng, there was a rapid slump in the pound’s value, with traders anticipating a higher base rate increase from the Bank of England. This led to many lenders pulling vast numbers of mortgage deals as quickly as possible.
According to reports, the number of deals available has started picking up, but they’re far more expensive. Mortgage lenders have been re-pricing their mortgage offerings based on uncertainty over interest rates and economic turmoil, and the deals that lenders are now re-introducing come with higher rates of interest.
It is thought that the higher interest rates will impact around 100,000 borrowers a month, including homeowners looking to remortgage and first-time buyers trying to get onto the property ladder.
Interest rates on average two-year fixed-rate loans have been rising since the mini-budget from the chancellor. Data shows that on the day of the budget, the average rate was 4.74%, and by last weekend it stood at 5.43%. It has now increased to 5.97%. During the same period, the average five-year fixed-rate deal has increased from 4.75% to 5.75%.
There are further concerns that those with a smaller deposit of just 5% to put down on a mortgage could find it particularly difficult to get a mortgage in the current climate. However, it is thought that more lower-deposit deals will return as the situation improves.
Ian Hewett from The Bearded Mortgage Broker said: “The 95% loan-to-value mortgage won’t die, but there will almost certainly be fewer of them due to the current economic situation. Equally, I am sure they will be resurrected once stability is back and confidence in the government has resumed.”