How might the rising mortgage rates affect you?
Various lenders have begun increasing their mortgage rates as a result of the conflict in the Middle East. Major mortgage lenders adjusted their fixed-rate deals last week, such as NatWest, HSBC UK and Nationwide Building Society, with further lenders now following suit.
These include Barclays, Halifax, Yorkshire Building Society, First Direct, Santander UK, Lloyds, Nottingham Building Society, West One, Gen H, Virgin Money and Coventry Building Society.
Other smaller providers have had no choice but to withdraw their fixed-rate products from the market temporarily for both purchase and remortgage applications. So far, the number of withdrawn residential products has reached just under 500 in the last 48 hours.
What has caused the rising mortgage rates?
The conflict in the Middle East has caused uncertainty over inflation, global energy prices and market volatility. Whereas a Bank of England base rate cut had been hoped for following next week’s review by the Monetary Policy Committee, this is now looking unlikely.
Lenders price their mortgage products based on swap rates. The instability caused by the conflict has led to a rise in swap rates due to higher inflationary pressure. This, in turn, has led to the current hike in fixed mortgage rates as lenders aim to mitigate increased costs.
How have mortgage rates changed?
Mortgage rates have risen above 5% due to the turbulent market, with the average mortgage rate now standing at 5.04%, according to Moneyfacts. This has already increased from the average of 4.91% that was recorded on Friday, 6th March. This is the highest rate since August last year.
Regarding fixed-rate residential mortgages, the average 2-year rate is now 5.01% and the average 5-year rate has increased to 5.09%.
Should you lock in a new rate now?
If your current deal is coming to an end, it’s a good idea to lock in a new deal now. Many lenders allow you to do this up to 6 months ahead of your deal’s expiry date. This arrangement is flexible in that you can always switch to a different deal if a better one becomes available in the meantime.
With the uncertainty being experienced, locking in a deal now protects you against further potential increases if you wait to see what happens with the market. If things turn around and rates start coming back down, however, you have peace of mind that you can change your new deal to a better one before your current one expires.
If you are on a variable rate, you may be concerned about rate fluctuations. You may prefer to switch to a fixed-rate deal for more stability. Our mortgage brokers can compare the options for you to help you make the best decision for your needs and circumstances.
Don’t hesitate to get in touch with us
We understand that this is a worrying time and are here to help address your concerns. Whether you’re looking to buy your first home, are planning to move or are considering remortgaging, give us a call on 01322 907 000.
Our mortgage brokers can check your financial situation and offer impartial advice on the options available to you. Being proactive now can help provide some security if markets continue to remain unsettled.