Will mortgage rates reach 10%?

Mortgage rates continue to make headlines as fallout from the Chancellor’s mini-budget tax cut hits borrowing costs.

While the Government has now reversed its decision to lower the top 45p rate of income tax for high earners, last week’s announcement has plunged the mortgage market into chaos. Some lenders have taken rates off the market, while others have raised them substantially.

Amid the chaos, one anecdote that caught the public’s attention came from an audience member on last Thursday’s episode of Question Time.

He said the 4.5 percent mortgage rate he had been offered was withdrawn while he was finalizing his decision, and then he was offered a new 10.4 percent.

Rate hike: An audience member on BBC Question Time shocked the audience by revealing that his mortgage offer had increased from 4.5% to 10.4% as a result of the events of the week .

The studio audience gasped. In cash terms, this would mean that on a £150,000 mortgage the payments would go from £834 a month to £1,406 a month, a whopping £572 increase.

But while rates are certainly rising, brokers want to reassure borrowers that the rate quoted on Question Time is not representative of the market as a whole.

Lewis Shaw, mortgage adviser at Shaw Financial Services, commented on the clip: “It’s going to needlessly scare people when many already feel vulnerable and worried about their mortgages and energy.”

On Monday, Oct. 3, the average two-year fixed-rate mortgage across all loan-to-value tranches was 5.75 percent, according to analysts at Moneyfacts. The average five-year fixed rate was 5.48 percent.

You can check how much a fixed rate mortgage could cost you based on the size of your mortgage, the value of the home and the length of the fixed rate with This is Money’s best mortgage rate calculator, powered by L&C.

Why would someone receive a 10% mortgage rate?

Currently there are only a few lenders that are quoting mortgage products in double digits. Many are ‘specialist’ lenders who offer loans to customers with poor credit histories or in unusual circumstances, such as the self-employed.

This is not to say that this is necessarily the case for the audience member. Another scenario is that the property was not of standard construction, for example made of concrete instead of brick. But even in that case, rates above 10 percent would still be rare.

I have not quoted a single client a mortgage of 10 percent or more

Alternatively, the advice the prospective borrower received may have been incorrect or hasty.

Ashley Thomas, a director at Magni Finance, cautions that if your rate sounds “drastically higher” than you expected, it may be worth getting a second opinion or going to an independent broker.

Chris Sykes, technical director at mortgage broker Private Finance, said: ‘On a residential mortgage, I haven’t quoted a single client a mortgage of 10 per cent or more.

“Most fixed rates for a residential mortgage are now falling to 5 percent, with a few outliers in the 4 and 6.”

Mortgage Lending: Lenders pulled home mortgage deals off the market last week, but how high are rates likely to go once they return?

Mortgage Lending: Lenders pulled home mortgage deals off the market last week, but how high are rates likely to go once they return?

Will mortgages reach double digits in the near future?

The short answer is that no one knows, but currently you are unlikely to reach those levels unless there are special circumstances surrounding your credit or property history.

However, interest rates are rising, and if you’re thinking of buying for the first time in the next year, or re-mortgaging at a fixed rate, you’re likely to pay more than you anticipated.

The Bank of England raised its base rate from 0.1 percent in December to 2.25 percent in September in a bid to stem rising inflation.

It is the first time since December 2008 that the rate has exceeded 2 percent. Most experts predict that it will continue to rise and could reach between 3 and 6 percent in the next 12 months.

Unpleasant surprise: Those buying their first home or remortgaging may find interest rates higher than they expected, but the typical home loan is currently not expected to reach double digits.

Unpleasant surprise: Those buying their first home or remortgaging may find interest rates higher than they expected, but the typical home loan is currently not expected to reach double digits.

Although not directly tied to the base rate, interest rates on new fixed mortgages generally increase when the base rate rises, because banks must pay more to borrow money.

Last week, the initial market response to the mini-budget sent predictions for the final peak of the base rate to exceed 6 percent, but now they have fallen back below 6 percent after the government revoked its plan to eliminate the 45 pence tax rate. .

However, a 5 percent base rate is still on the cards. At 5 percent, mortgage experts say the market would start to experience “significant stress.”

According to calculations by broker L&C, an increase in the base rate to this level would see average standard variable rates rise to 8.49 per cent, or £1,206.83 per month on a £150,000 mortgage, an increase of £294. .83 based on current levels.

“An increase to a 5 percent bank rate would make life very difficult for many borrowers when their fixed rates end,” said Raymond Boulger, a senior technical manager for mortgages at broker John Charcol.

What should I do if I need to re-mortgage?

After last week, when lenders jacked up rates amid price chaos, the scene has changed.

Some lenders that pulled mortgages have started coming back with new prices, while others are pausing lending for a few more days while things calm down.

If you have a fixed rate or other mortgage agreement term ending, then it’s worth thinking at least six to nine months ahead and exploring your options.

Although things are moving quickly, most product transfer offers remain on the market, so consider what your current lender can offer you, as well as consult a good mortgage broker about the rates a new bank or mortgage credit company.

> Read our guide to remortgaging and what you need to know to understand more

Because rates are constantly rising, some lenders have extended the time period in which existing customers can secure a new deal before their current mortgage is due, sometimes allowing them to do so up to six months sooner. This allows borrowers to get a more favorable rate before future increases.

If you have a rate approved rather than just offered, it’s usually good for six months, which means if you got one in April, when the average two-year fixed-rate offer was 2.86 percent, it might still be good.

It is incredibly rare to see lenders take out approved offers and there are no current reports of this happening for homeowners.

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.

This is Money’s mortgage broker partner, L&C, he told me the mortgages are still available and you can use our best mortgage rate calculator to show you 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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