ortgage interest rates are at the highest levels that Britain has seen for years, since August 2008 and the financial crisis.
The average two-year mortgage rates hit a 15-year high of 6.66% today, surpassing the peak hit in the wake of last year’s mini-budget.
rate on a two-year deal is up from 6.63% yesterday, according to data from Moneyfacts.
Additionally, lenders, brokers and property experts are warning high mortgage rates could keep rising.
Last month, the Bank of England raised the base rate to 5 per cent last month – the most it has been for 15 years – which caused concern across the country.
Analysts have warned that many households will feel the “intense pain” of crippling costs. The increase has led to the average cost of fixed-term mortgages rising to levels Brits had not seen since November 2022, when then-Prime Minister Liz Truss tried to push through her tax cuts, which spooked the markets and caused rates to rise.
Labour and said that, not including the latest hikes, Brits were already paying much more than their neighbours. It said a UK mortgage for a typical household costs £2,000 more a year than in France.
The European Central Bank showed that interest rates on average were 2.91 per cent in France, 3.61 per cent in Belgium and 3.89 per cent in Germany.
Labour said this means that for a £200,000 loan paid back over 25 years, annual UK mortgage payments are around £1,100 higher than in Belgium and Ireland, and about £800 more than in Germany and the Netherlands.
Chancellor Jeremy Hunt last week agreed measures with banks to help abate the panic being felt by homeowners, including giving people struggling with repayments a 12-month grace period before repossessions begin.
In recent weeks, mortgage lenders have increased rates and withdrawn offers rapidly, raising expenses for homeowners looking for new agreements.
Since the majority of households have fixed rate agreements, this won’t instantly have an impact on everyone. However, as these agreements end, homeowners will face an increase in borrowing prices of an average of £2,900, predicted think tank the Resolution Foundation.
Between July and September, over 400,000 people will see their current fixed packages expire. Many will have to plan their finances to accommodate monthly repayments that are several hundred pounds more expensive than they are used to.
Why are mortgage rates rising?
The Bank of England base rate is the key factor in setting mortgage rates.
Recent high inflation and pay increases indicate that interest rates will probably rise more than anticipated, increasing borrowing expenses.
How are mortgage rates linked to interest rates?
Only some mortgage rates are affected by interest rates. How much these will affect your mortgage depends on what type you have. Take a look at our guide to mortgage types for first-time buyers for more information.
If you are on a fixed-rate mortgage, you don’t need to be immediately concerned about an increase in interest rates. Regardless of whether interest rates increase or decrease over the agreed-upon time frame, whether that’s two years, three years, five years or more, your mortgage rate and monthly payments will not change.
You will, however, automatically switch to your mortgage lender’s standard variable rate (SVR), which is determined by the Bank of England base rate, after your fixed term expires. You’ll probably pay a higher interest rate on your mortgage if this has increased and your monthly payments will go up.
Discounted, tracker or SVR mortgages are usually affected by interest rates, therefore, if you are on one of these mortgages you can expect increases.
What is the next interest rate decision?
The Bank of England’s Monetary Policy Committee will next convene on Thursday, August 3, 2023, to determine the appropriate level for interest rates.
The current bank rate is 5 per cent. It is expected that this will increase even further in 2023.
When might mortgage rates go down?
Mortgage rates decreased after reaching their peak in the autumn of last year, but due to inflation that has remained close to a record high, they have recently increased once again.
As a result, some experts now predict that the Bank of England will keep raising interest rates in 2023, and several lenders such as Natwest are preparing for this by raising mortgage rates.
In a sign that even higher rates could be on the way, the number of products on the market fell by 300 in the space of a day, to the lowest since February.
Top lenders such as Halifax, Nationwide and NatWest have all repeatedly pulled mortgages from the market this year in order to reprice them at higher rates.
Today, representatives from some of the UK’s top banks and building societies said the Bank of England’s base rate was likely to keep rising for the rest of the year, meaning little sign of a let-up for mortgage holders in the short term.
Henry Jordan, home commercial director at Nationwide said: “The market-implied view is that the base rate is to rise to 6.5% and then they might be reduced to about 4% over the next couple of years.”
What is the government doing about it?
Former Bank of England deputy governor Sir Charlie Bean said earlier this month that it would be “risky” for the government to intervene in order to protect mortgage holders from increasing interest rates.
Instead of discussing new ways to help, Rishi Sunak pointed to existing support for first-time buyers that has been introduced to help get them on the property ladder.
The prime minister said: “There is also support available for people – we have the mortgage guarantee scheme for first-time buyers, we have the support for mortgage interest scheme to help people as well. That’s why one of my first priorities is to halve inflation.”
The best person to speak to about your mortgage is your lender or a mortgage broker to find out the rates at which you can remortgage.
Source: standard.co.uk