Mortgage misery for millions as interest rates hit 15-year high
MILLIONS are set for more mortgage misery as interest rates have hit a 15-year high today.
The average rate on a two-year fixed mortgage has increased to 6.66%, the highest its been since 2008.
Figures released by data site MoneyFactsCompare have revealed that the rate has now surpassed the previous peak of 6.65% last October.
This was during the aftermath of the chaotic mini-Budget.
It means that this is the highest rate for a two-year deal in 15 years.
It comes just a week after the average interest rate on a five-year fixed rate mortgage ticked up from 5.97% to 6.01% overnight.
The average interest rate on a five-year fixed rate mortgage ticked up from 5.97% to 6.01% overnight.
This was the first time this year that the average rate for five-year fixes had gone over 6% this year.
Today, the rates hit 6.17% for a five-year deal.
The peak for a five-year fix is still a little way off at 6.51% also in October 2022.
Rates have been on the rise again amid expectations that interest rates will need to stay higher for longer as the Bank of England tries to tackle “sticky” high inflation.
The central bank increased rates by 0.5 percentage points in June from 4.5% to 5%, the highest in just under 15 years since September 2008.
It is also the 13th time in a row that the BoE has raised rates since December 2021 when they were at historic lows.
The latest increases to rising rates brings more misery for mortgage holders.
The bulk of homeowners are on fixed-rate products, although around 2.4million deals are due to end between now and the end of next year, according to UK Finance.
In a bid to help those struggling with higher monthly payments, the government has brought in new measures including extending the term of their mortgage and moving to interest-only repayments.
A new consumer duty, which takes effect at the end of the month, will also force lenders to offer support that meets a customer’s individual needs, communicate clearly with people about their options and provide decent customer service.
Later this morning, mortgage lenders will be facing questions from MPs about the stress felt by borrowers, those falling behind on payments and the larger impact on the housing market.
How to get the best deal on your mortgage
If you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
But there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
If you have a fixed rate, you could see higher rates when you come to the end of the current term after thirteen Bank rate rises since December 2021.
And if you’re nearing the end of a fixed deal in the next six months it’s worth contacting your broker now to lock in a rate.
If they come down between now and the end of your deal, you can always apply for another rate before you remortgage.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare for you, with most offering free advice to secure you the best deal for you.
Some brokers charge for advice, so ask them first.
It could cost a couple of hundred pounds but it might save you thousands on your mortgage overall.
You’ll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it to the cost of the mortgage, but beware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember, if you decide to remortgage to a new lender you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
It’s possible to avoid new affordability checks by remortgaging to a new deal with your existing lender, providing you don’t want to borrow more or extend your term.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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