Average Mortgage Rates Approach 6%, Raising Concerns for Homeowners

Average Mortgage Rates Approach 6%, Raising Concerns for Homeowners

…By Henry George for TDPel Media.

According to data from a financial information website, the average five-year fixed-rate homeowner mortgage is gradually approaching 6%.

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Moneyfactscompare.co.uk reported that as of Thursday, the typical rate for a five-year fixed-rate residential mortgage was 5.94%, slightly higher than Wednesday’s rate of 5.91%.

This marks the first time since November 21 last year that the average five-year fixed-rate mortgage has exceeded 6%.

Two-year Fixed-rate Mortgages Also Experience an Upward Trend

Simultaneously, the average two-year fixed-rate residential mortgage on Thursday stood at 6.37%, up from Wednesday’s average of 6.30%.

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In October last year, two-year fixed-rate mortgages reached a peak of 6.65% due to market volatility following the mini-budget.

Although rates later stabilized, they once again surpassed 6% earlier in June 2023 for the first time this year.

Competitive Mortgage Deals Remain, but Expert Advice is Essential

Despite the rising rates, there are still competitive mortgage deals available for borrowers to choose from.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, emphasized the importance of seeking advice to explore various options.

Borrowers coming off a fixed-rate deal or those on a standard variable rate (SVR) should be particularly cautious.

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Springall also advised those currently benefiting from low fixed-rate mortgages to consider overpaying their mortgage if feasible, as it can help reduce the term of their agreement.

End of Fixed-Rate Deals and Market Expectations

Around 2.4 million fixed-rate mortgage deals are set to conclude between now and the end of 2024, creating further concern amidst the increasing mortgage rates.

Market expectations suggest that interest rates will need to remain higher for an extended period as a measure to control persistent inflation.

Consequently, rates on mortgage deals have been rising, reflecting these expectations.

Mortgage Market Trends and Increased Remortgage Searches

Moneyfacts reported a slight increase in the availability of mortgage products, with 4,430 residential mortgage products available on Thursday compared to 4,407 on Wednesday.

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Additionally, Twenty7tec, a financial technology firm, noted that this week has been the busiest of the year so far for remortgage searches.

The Bank of England’s recent base rate increase has spurred customers to seek new rates, and lenders have been swift in adjusting their rates to accommodate customers’ needs.

New Mortgage Charter and Borrower Protections

Following a meeting between Chancellor Jeremy Hunt and major banks, lenders representing approximately 85% of the mortgage market have agreed upon a new mortgage charter.

This charter provides certain benefits for customers facing financial difficulties.

Customers who are up to date with their payments will have the option to switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments.

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Borrowers also have the opportunity to revert to their original term within six months by contacting their lender.

The charter emphasizes that unless exceptional circumstances arise, borrowers cannot be forced to leave their homes without their consent within a year of their first missed payment.

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