The average fixed rate for a two-year fixed mortgage on all securities loans has risen to 6.53 percent, the day after new Chancellor Jeremy Hunt backed away from much of the government’s tax cut package.
The average rate for five-year fixed deals also rose to 6.36 percent, despite dipping slightly to less than 6.30 percent late last week, according to financial information service Moneyfacts.
Separately, NatWest just raised its mortgage rates for the second time in just over a week, raising all of its fixed rates to more than 6 percent.
The last time the average two-year fixed-rate mortgage hit 6.4 percent or higher was in August 2008, in the aftermath of the global financial meltdown, when it hit 6.94 percent.
Increase in interest: The price of fixed-rate operations has continued to rise since the end of last year, but it has accelerated since the government’s mini-budget
Hunt’s announcements, including the suspension of the £2,500 average energy bill cap in April, were made in an effort to calm markets following the liquidation of gilts (public debt) and the rising cost of borrowing. .
This is passed on through lenders to homeowners by increasing mortgage rates.
The increases will cost borrowers thousands of dollars more a year to pay for their homes. The average rate for a two-year fixed deal across all deposit sizes has risen 1.79 percent from the day of the mini-budget to now, according to Moneyfacts.
The increase adds £215 a month to the cost of a £200,000 mortgage, or £2,508 a year.
Why do mortgage rates keep going up?
Today’s rates appear to show that the impact of the U-turns has not yet filtered into the mortgage market.
This is despite brokers suggesting that the cost of borrowing for banks and building societies is already getting cheaper.
Lenders may find it difficult to cope with the level of customer inquiries they receive due to market uncertainty, and do not want to increase the pressure on their services by lowering rates and becoming the cheapest on the market.
Chris Sykes, technical director at brokerage Private Finance, said: “Since Kwasi was sacked last week, institutional lending rates have come down, so it will come as a surprise to some that mortgage providers in some cases continue to raise rates. rates”.
“In talking to lenders, this is no longer necessarily due to political uncertainty or the cost of financing. They are currently expanding service levels and want to curb demand by raising rates above their competitors.’
Moneyfacts fees are averages and not the cheapest offers on the market. These can be seen below.
|fixed period||Deposit||Best rate 18 Oct 21||Best price 14 Oct 22||% difference||Payment difference on loan of £150,000|
|fixed period||Deposit||Best Rate 22 Sept 22||Best rate 13 Oct 22||% difference||Payment difference on loan of £150,000|
What are the NatWest rates now?
Having raised its rates on October 10, NatWest has now pulled some of those products and revealed a new series of mortgages that went live today.
The bank’s cheapest rate, a five-year fixed offer that is only available to existing customers with a 40 percent deposit, has risen 0.8 percent to 6.04 percent from 5.24 percent. .
On a £200,000 mortgage, this increases monthly payments by £96, from £1,197 to £1,293, the equivalent of £1,152 a year.
For first-time homebuyers looking for smaller deposit mortgages, the rate increase is less pronounced but still significant.
Calmer? Some brokers say the speed of mortgage rate change could start slowing down soon
A two-year fixed contract with a 10 percent deposit for a new mortgage rose 0.4 percent to 6.54 percent.
It means those who closed a deal with NatWest just a week ago will have saved £49 per month or £588 per year.
For the same terms at a five-year fixed rate, the price has risen 0.75 per cent to 6.39 per cent, adding an extra £92 to the monthly mortgage payments, or £1,104 a year.
Those who need a new mortgage can access updated rates based on their own circumstances using This is Money’s mortgage calculator.
Where will the fees go next?
With the rapidly changing economic context, it’s hard to tell. However, some brokers are predicting that things could calm down a bit in the coming weeks, at least when it comes to mortgage rate changes.
The Bank of England’s next base rate increase is already priced in, and this may delay any further changes by lenders.
Craig Fish, founder and director of Lodestone Mortgages & Protection, said: “In the short term, I really don’t expect to see much of a change, even though a couple of lenders raised their rates in the last few days.
“I think the next Bank of England base rate increase is already priced in, and this may delay any further changes by lenders.”
The next meeting of the Bank to decide whether to increase the base rate will be on November 3.
Barclays has also introduced new product rates, with its five-year fixed-rate mortgage on a deposit from 40 percent to 6 percent for new business.
It also has a seven-year 6 percent fix for existing customers with a 40 percent deposit that rolls over to a new deal.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..
Banks and building societies continue to lend and mortgages are still being offered and applications accepted.
However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.
This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property
What if I need to re-mortgage?
Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.
Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.
What if I am buying a house?
Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.
Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.
How to Compare Mortgage Costs
The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.
You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.
Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .
> Consult the best fixed-rate mortgages that you could apply for
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