The UK government is in the news more than ever at the moment. Changes within the current Conservative political party have caused unrest within the financial markets.
A series of unfunded tax cuts announced by the previous Chancellor of the Exchequer, Kwasi Kwarteng, whilst brief and now the majority reversed, resulted in the Bank of England issuing an emergency statement pledging to lift rates ‘as much as needed,’ in order to control inflation and the following major volatility which caused the value of the pound to drop and affected UK gilts.
The Economy is still reeling from this and whilst the Bank of England has already raised the base rate seven times from 0.1% to 2.25%, further rises are expected.
Upon the announcement of this so-called, ‘Mini-Budget’ government borrowing costs soared. As a result of this and the current uncertainty of future interest rates, nearly all lenders pulled around a thousand mortgage deals and products from the market. Because of this, there were reports of property sales falling through and lenders who had previously agreed to mortgages backed out at the last minute.
Upon further investigation, this appears unlikely. Mortgage offers are withdrawn by lenders upon exceptional circumstances, mainly applicants’ situations changing, offer expiry, or a change of product agreed upon within the time of offer.
Current Mortgage Products
That being said the interest rate of a typical two-year fixed rate has now breached 6% according to Moneyfacts. This is the first time this has happened in 14 years.
An average of approximately 100,000 people a month are coming to the end of their current mortgage deal and will be facing a significant rise in their monthly repayments going forward. If you are within this group of people it might be worthwhile looking into your options now to try and secure the best deal you can.
With 6.07% being the average two-year fixed deal on 5 October, as an example, someone who is already borrowing £200,000 on a 30-year term mortgage is facing an extra £170 per month approximate increase in their payments.
We do not know what will happen to the market next. If the Bank of England leaves interest rates unchanged then lenders will have more certainty and more products will return.
Stability
Mortgage rates have been known to change constantly with some lenders and products only being offered for a limited period or at a limited edition rate. With the recent uncertainty of financial markets, stability is key to consumer confidence. We have already noticed some changes and even reductions in rates with some lenders as the political situation changes around us.
Mortgage advisors who are ‘whole of market’ are worth their weight in gold at the minute. They can research each deal for you and tailor your new mortgage to your circumstances. Each of our brokers here at Agentis has access to the whole of the market so if your mortgage is up for renewal or you are looking for your first mortgage, give us a call to see how we can help today.
