Warning UK mortgage rates are expected to rise even further as market volatility persists, borrowers are advised.
Lenders have been pulling out of agreements and boosting rates at a “relentless pace,” according to broker London & Country’s David Hollingworth, and this week “is going to bring more of the same.”
In the past month, mortgage rates increased by nearly 0.5 percentage points, approaching the 6% average fixed rate.
It happens at a time when 1.5 million people are getting rid of fixed contracts this year.
Since recent data revealed that UK inflation is not declining as swiftly as anticipated, rates have been increasing.
The Bank of England is expected to increase interest rates from their current 4.5% to as high as 5.5%, which is higher than previously anticipated.
It directly affects lenders, many of whom have recently increased rates and pulled offers off the market.
The latest major lender to halt new purchases made through brokers was HSBC last week. On Friday, though, it temporarily reopened such offers.
It’s been very persistent for the last couple of weeks, Mr. Hollingworth said on BBC Radio 4’s Today programme. We’ve returned to the time when waiting around while considering a fixed rate is not an option.
Those with cheaper agreements faced a “tidal wave” of business, he claimed, forcing lenders to reprioritize deals as the market altered around them.
“Unfortunately, I believe that more of that may happen this week.
But ideally those rates will just begin to level out, and things will start to quiet down soon.
Moneyfacts, a provider of financial data, estimates that the average interest rate for a two-year fixed-rate mortgage is 5.86% and for a five-year agreement, it is 5.51%.
They were 3.03% and 3.17%, respectively, in May of last year, indicating significant increases in borrowing rates for many households.
A borrower automatically switches to their lender’s standard variable rate (SVR) once a fixed term expires. Brokers claim that because these SVRs have increased, anyone who chooses to wait and see will experience a significant increase in their rate, which would result in a significantly larger monthly mortgage payment.
Ian Stuart, the head of HSBC in the UK, acknowledged that many of his clients were going through a “deeply concerning” period.
“If you have an old rate, as many people do, say 1.5%, and you’re going to switch to something like 5%, that will have a significant impact on your monthly budget.”
He claimed that last week the bank had to stop selling new deals because of “unprecedented” demand.
A further increase in UK interest rates, he added, would put more pressure on the market.
Not the news mortgagees would want to hear, but I don’t believe inflation will decline as quickly as we had thought.