Attention homeowners and prospective buyers, brace yourselves for some concerning news about the mortgage market. Average mortgage rates are on a relentless upward trajectory, inching closer to the dreaded 6% mark for a two-year fixed deal. In the span of just a week, these rates have soared from 5.72% to 5.86%, leaving many feeling the pinch. And if you think that’s bad, let me share the numbers from a month ago: a staggering 5.33%!
But that’s not all. The situation gets even more disheartening when we look at the five-year deals. A week ago, they were hovering around 5.41%, but now they’ve catapulted to an average of 5.51%. And remember, this is a month-on-month increase from a relatively manageable 5.03%. These figures should give anyone searching for stability in the mortgage market reason to pause.
Sadly, it’s not just the rates that are causing distress. The range of available mortgage products has dwindled once again. According to the latest data from Moneyfacts, we’re now left with a meager selection of 4,952 products, down from 5,056 just last Friday, and a significant drop from 5,300 a month ago. It seems like the options are vanishing before our eyes.
City experts are sounding the alarm bells, warning us about an impending “big reset of mortgages.” Shockingly, only a third of borrowers who were enjoying affordable fixed-term deals have managed to escape their clutches. The rest of us are left vulnerable to the mounting mortgage rates that have surged in recent weeks. Blame it on worse-than-expected inflation figures, which have propelled the annual rate to a staggering 8.7%.
To make matters worse, traders in the market are bracing for an increase in the Bank of England’s base rate. The current 4.5% rate may soon become a thing of the past, with predictions suggesting it could soar to 5.5% by the end of this year. The next update is scheduled for June 22, and it’s certainly not a date many homeowners are eagerly anticipating.
As the rising interest rates and high inflation continue to wreak havoc, it’s no surprise that mortgage providers are taking drastic measures. Moneyfacts has reported that a slew of ten-year fixed-rate deals have been unceremoniously withdrawn from the market. It’s as if stability in the mortgage realm is slipping through our fingers.
The consequences of this mortgage upheaval are not to be taken lightly. The Centre for Economics and Business Research estimates that borrowers will bear a hefty £9 billion burden over the next year due to these escalating rates. Meanwhile, the Financial Conduct Authority warns us that approximately 116,000 borrowers are about to come off their fixed rate deals this month. The future looks uncertain for many.
David Hollingworth, the associate director at broker L&C Mortgages, summed it up best when he spoke on BBC Radio 4’s Today program. He emphasized the relentlessness of the rate changes, describing them as an unyielding force. To add insult to injury, any deals that have been withdrawn have mostly been replaced by higher rates. It seems like we’re trapped in a cycle of rising costs and limited choices, making the pursuit of affordable mortgages an increasingly challenging endeavor.”
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