With the Bank of England base rate rising to 1.75% in August and with a further increase of 0.75% predicted later this month, borrowers are rushing to try and lock in the best mortgage rates. However, many are finding it hard to secure a good fixed rate mortgage deal after a number of lenders pulled products from the market at short notice, some after just 24 hours. With demand so high, lenders are quick to remove deals from the market in an effort to avoid becoming overwhelmed. While product withdrawals are a regular occurrence in the mortgage market, the speed at which they are being withdrawn is causing increased anxiety amongst borrowers and even those with larger deposits and plenty of equity are struggling to secure the best fixed rate mortgage deals.
The number of residential mortgage products was down by 517 in September, according to the latest data from the Moneyfacts UK Mortgage trends treasury report, leaving only 3,890 deals on the market, the lowest number for over a year. In terms of interest rates, the average overall 2 year fixed rate now stands at 4.24%, while the average 5 year fixed rate now stands at 4.33%, the highest they have been since January 2013 and November 2012 respectively.
How to guarantee the best mortgage rate
We've seen increased activity in the housing market over the last couple of years, thanks to record low interest rates and the stamp duty holiday, meaning a large number of borrowers are coming towards the end of their 2 year fixed rate deals. Predictions suggest that the rate that borrowers are likely to pay when they come to remortgage will be around 4% higher than they are paying now. That equates to around £200 per month extra for every £100,000 of mortgage borrowed, based on a 25 year term. Below, we share some tips for those that are due to remortgage in the next 6 months as well as what you can do now even if your remortgage is a little way off.
Remortgaging in 6 months
If you are due to remortgage in the next 6 months then you should start speaking with a reputable, independent mortgage broker now. A mortgage broker can use their expertise and experience to secure the best deal for your circumstances. Importantly, an independent mortgage broker can access every deal on the market, helping to process your application quickly, reducing the chance of missing out on the best deals. If you are looking for a reputable independent mortgage broker, then you could consider Habito*. It has a team of dedicated mortgage advisers that offer whole-of-market advice. The process is quick and easy using its online portal to upload documents efficiently. Alternatively, check out Vouchedfor* for a free mortgage review from a 5 star rated mortgage adviser.
You may also want to read our market commentary which includes the market's latest predictions on where interest rate may be headed in the future. Also, check out our article 'Remortgaging in 2022 - Is now the right time to fix and for how long?'
Not due to remortgage just yet
If you have longer than 6 months to run on your current fixed rate deal then it is a good idea to start building a cash buffer to help ease the burden of higher monthly mortgage payments. Also check the terms on your current mortgage deal. Find out whether your lender charges an Early Repayment Charge (ERC), and if so, work out whether it is worth paying the fee in return for locking in a better rate now, before any impending rate rises. You should always seek mortgage advice before making any decisions, so if you don't already have mortgage broker that you trust then you can find one via Vouchedfor*.
As the saying goes, 'forewarned is forearmed' and so there are things you can do now to prepare yourself for higher mortgage repayments in the future. Check out our 28 day financial fitness challenge where we explain how you can budget effectively, cut your household and personal bills and reduce discretionary spending. We also provide other practical tips on how to reduce the amount of tax you pay as well as checking any benefits you may be entitled to.
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