3rd October, 2022

Just when you think the cost of living crisis couldn’t get much worse, the mortgage market takes a hit due to the rise in interest rates.

What’s the situation?

On 22nd September, the Bank of England raised interest rates by 0.5% - increasing from 1.75% to 2.25%. That’s the 7th raise since December 2021, putting bank rates at its highest level in 14 years.

The sad truth is, with the economic uncertainty, it’s likely that rates will rise even higher to get inflation under control. Some have speculated rates could reach up to 5% or 6% next year.
 
The Bank of England’s Monetary Policy Committee (MPC) come together monthly to discuss the base rate. Their next meeting is due on 3rd November where they will decide if they will increase interest rates again. However, the Bank is not ruling out an ‘emergency rate rise’ that could be implemented sooner.

How has this affected the mortgage market?

Major mortgage lenders have pulled mortgage deals for new applicants (following the ‘Mini-budget’ announcement in September) to ensure they remain profitable – with more lenders expected to follow suit.

What does it mean for me?

Almost a third of households in the UK have a mortgage, with many more hoping to get one.
As it currently stands, if you’re looking to join the property ladder, you could find it difficult to get a new mortgage. If you do, higher mortgage costs mean you may have to reconsider your budget to meet your loan repayments.

Existing homeowners on a variable rate will almost certainly see a rise in monthly repayments. Fixed-rate tariffs have already included it in new pricing. So, if you’re on a fixed-rate mortgage, you can expect to see a sharp increase when your fixed-rate ends if you do not secure a new rate.

Most fixed-rate tariffs last for 2 or 5 years. If yours is scheduled to end within the next 6 months, you should seek advice from a qualified mortgage advisor - in addition to discussing options with your current lender – as soon as possible. Acting fast may mean that you can lock in today’s rate before it increases even more.

Overall, property prices are also rising alongside interest rates. Research from Rightmove suggests the average cost of a new home has already increased by 0.7%.

Stamp duty cuts

One positive change announced in the Mini-budget in September is the stamp duty cut.

The threshold in which homeowners should pay stamp duty tax has risen, meaning homeowners in England and Northern Ireland will only pay stamp duty tax on properties valued at more than £250,000.

First-time buyers will not need to pay stamp duty on the first £425,000 of their property’s value.

How to check mortgage rates

You can check mortgage rates by using a mortgage table or calculator on any mortgage broker or partner website.

You’ll need to input some personal criteria such as:

- Purpose of the mortgage, e.g. remortgage or first time buyer
- Property value and how much you want to borrow
- Select whether you want to fund a shared ownership, buy to let or interest only
- Filter the type of mortgage you require – for example, how long you want to loan money for

If you’re worried about your financial situation with regards to your mortgage or any other financial matter, you can see advice and support from your local Citizens Advice Bureau.

If you are looking for advice on the matter, our team over at One Call Mortgage Hub are more than happy to help you with your mortgage needs - so feel free to get in touch.


Written by: Ashley Kippax

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* Please note that the above information has been gathered through secondary research. The information provided is not based on our opinion. You should seek further guidance and information before making an informed decision.

Sources:
https://www.forbes.com/uk/advisor/mortgages/mortgage-rates-09-28-22/
https://www.theguardian.com/money/2022/sep/27/uk-mortgage-deal-banks-building-societies-interest-rate-rises