Mortgage rates have risen yet again after the latest meeting of the Bank of England’s Monetary Policy Committee, (MPC).
They have voted to increase rates by 0.25% to now stand at 1.25%.
It has been a consistent period of rate rises in the past 6 months since the low point of just 0.1% in December last year.
This will be a big blow to many prospective borrowers who have seen mortgage rates increase dramatically since they started the property search, and it will no doubt lead to yet another spate of mortgage lenders pulling their current product offerings quickly and re-pricing them upwards.
For those who are looking at remortgaging now, there will be an element of payment shock as they come off lower fixed rates into a market priced around 1% higher than they are currently paying.
All of this exacerbates the cost-of-living crises that is really starting to squeeze household finances now, as higher mortgage payments join rising energy, food and fuel costs.
It is also starting to feed through into lenders’ affordability calculations meaning people are seeing their borrowing power diminish slightly, which, with property prices remaining high, may now mean their preferred new home is agonisingly just out of reach.
At some stage, this should start to affect house prices and we expect the pace of growth to fall back over the coming months. That said, demand is still high and successive Governments failures to make a dent in the supply of good quality, affordable housing remains an issue.
As for the Government’s latest comments on a new Right to Buy revolution and the utilisation of benefits towards mortgages, these are woefully out of touch and will have little or no effect at all. This is a classic case of all froth and no substance.
The first place attention turns to is mortgage payments – the single biggest monthly commitment for most people. This rate rise will not affect many people for maybe several years, as they are in the middle of a fixed rate.
For those on variable or tracker rate mortgages, their payments will increase next month or possibly the month after depending on their lender’s systems and processes.
Anyone whose products are coming up for renewal will find the products they can choose from might be more expensive than last year or the year before. Lenders have been increasing their products for the last few months as SWAP Rates (the expected level of interest rates in the future upon which lenders base their fixed rates), have been increasing dramatically in recent weeks.
Given the worldwide inflationary issues, which saw the FED in the US increase their rates by a whopping 0.75% yesterday, we are set to see increasing products for the remainder of this year.
Borrowers whose mortgage products are due for renewal in the next six months should contact a professional mortgage broker to look at their options as early as possible, as they may be able to lock in a current deal before rates increase any further even with six months to go.
However, you may have to be prepared to see those payments increase, especially if (like me) you are coming off a 5-year fixed-rate below the 2% level.
To speak to one of our friendly, down-to-earth advisers please call us on 020 7220 5110 or send a message via our contact form.