Two-year fixed mortgage rates near 6% on mini-Budget as home loan costs rise and brokers warn of a second week of chaos
- Mortgage rates have risen nearly a full percentage point since the mini-Budget
- Brokers warned homeowners face more chaos amid high interest rates
- Lenders withdrew nearly 2,000 mortgage products in a fight to change the price of the deals
Mortgage rates have risen nearly a full percentage point in the ten days since the mini-budget, figures showed today.
Brokers warned that homeowners face a second week of chaos as lenders try to cope with market expectations of sky-high interest rates.
The typical cost of a two-year fixed home loan has risen to 5.75 percent, up from 4.74 percent on September 23, the day of Foreign Minister Kwasi Kwarteng’s announcement.
This is more than double the average rate of 2.34 percent offered last December, according to analysts at Moneyfacts.
Mortgage rates have risen nearly a full percentage point in the ten days since the mini-budget, figures show today.
Meanwhile, the price of a five-year fixed-rate mortgage soared to 5.48 percent today from an average of 4.75 percent on mini-budget day.
You can check what fixed-rate mortgage deals might be offered to you and how much they would cost based on the size of your mortgage, the value of the home, and how long you want to settle for. with This is Money’s best mortgage rate calculator, powered by L&C.
Panic gripped the property market last week amid concerns that the Bank of England would raise its base rate to 6 percent next year.
Lenders withdrew nearly 2,000 mortgage products last week as they scrambled to reprice their offers to reflect future interest rate increases.
Some, including Virgin Money and HSBC, cautiously returned to the market late last week, but with inflated rates.
NatWest announced Sunday that it would increase its fixed-rate offers by as much as 1.78 percentage points.
More than two million homeowners with fixed-term loans will remortgage between now and the end of 2024, according to Bank of England data. They face paying thousands more when budgets have already been hit.
Yesterday, the Chancellor announced that he was making a U-turn on his most controversial policy, cutting the income tax rate from 45 pence.
The brokers reportedly fielded inquiries from clients asking if they could obtain mortgage applications submitted over the past week.
Experts said borrowers mistakenly expected the Chancellor’s U-turn could prompt lenders to cut their rates in the coming weeks.
Dominik Lipnicki of Your Mortgage Solutions said: ‘The chancellor’s decision yesterday was political and will have little effect on the city. People are still very stressed and terrified because they are starting to realize that they are facing a huge shock to their mortgage bills which is inevitable right now.
The rate hike is likely to dampen property sales, said Dominic Agace, chief executive of real estate agency Winkworth. “It’s what happens every time there’s an increase in mortgage rates,” he told the Financial Times.
He added that the slowdown would be sharpest in areas of the market where sales peaked during the pandemic, such as large country houses.
On the first day of last month, 3,890 mortgage products were on sale. That crashed to around 2,000 and yesterday the figure stood at 2,262.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers may be worried about seeing a further drop in mortgage availability, but many lenders have said their withdrawals are temporary amid interest rate uncertainty.”
‘It would be prudent to seek the advice of an independent broker, especially for those borrowers who have not yet started the mortgage process and are deterred by the level of choice and much higher mortgage rates than they might have expected.
“The next few weeks will be crucial to see where lenders go, but we’ve already seen some new fixed offers coming in since last week.”
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. writes This is Money editor Simon Lambert.
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