11 July 2023
If you are covering the news that mortgage rates have hit the highest level for 15 years, please find below a comment from Charlotte Nixon, mortgage and financial planning expert at Quilter:
“With the average two-year fixed mortgage rate hitting a devilish 6.66% according to Moneyfacts, many mortgage holders and potential house buyers must be wondering when the flames will die down and things start to look a bit more normal. Unfortunately, the UK is in a difficult place with its battle against inflation and as such interest rates are going to have to keep going up in the short-term. This is going to feed into the mortgage market and as such this is not the top of the peak – more pain is to come.
“The chaos in the mortgage market is hitting house prices and this is going to cause some uncertainty over the rest of the year as servicing costs become harder to manage and affordability is tested to its limits. For those who have a fixed rate deal ending in the next six months, the message is clear – act now or you could face exorbitant costs on the standard variable rate that you will default on to.
“For those looking to take out a mortgage now, there are options to consider to lessen the burden, though they do come with consequences. Taking out a mortgage with a longer term can help reduce your monthly payments, however, cost over the whole period will be greater. Not all lenders offer this length but if you use a mortgage adviser, they can help you search the market for the best deal. Although a longer term does mean that you will pay more in interest over the full term it does reduce your monthly outgoings. Once you come to the end of your deal you could opt to remortgage to a shorter term, so it doesn’t necessarily have to be forever.
“Ultimately, this is a very uncertain time and it will pass with time, but for now people need to stay calm and speak to their lender or mortgage brokers if they have any issues. Lenders don’t want to deal with defaults on their loans and with the recent Mortgage Charter introduced by the government, they are there to help in the first instance.”
