Mortgage rates have spiralled upwards in recent days, with many lenders withdrawing deals and replacing them with much higher rate products.
Anyone buying a home or trying to remortgage is likely to have seen their potential mortgage costs shoot up, which can be extremely frightening, especially given the fact so many other living costs are rising at the same time. For buyers, it is likely to mean that many will simply be priced out of the market, whilst those remortgaging may face paying hundreds more pounds a month for their next mortgage.
Here, we explain what the current mortgage turmoil means for you, and what you can do to help minimise the impact of rising rates.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Contents
- Why are so many mortgage deals being withdrawn?
- With mortgage rates going up so quickly, is it even worth remortgaging?
- My mortgage deal is finishing soon – where can I go for help?
- Will it take me longer to get a mortgage?
- If I’ve recently received a mortgage or equity release offer, can my lender now withdraw it?
- What if I can’t afford my new mortgage payments?
Why are so many mortgage deals being withdrawn?
The sudden changes in the mortgage market have been triggered by latest inflation figures, which were higher than expected. Inflation eased to 8.7% in the 12 months to April, but core inflation – which takes out factors such as food and energy – is at a 31-year high. As a result, the Bank of England is likely to need to raise rates more sharply than it previously forecast, with markets anticipating that they could go as high as 5.5%. This has impacted swap rates, which mortgage lenders use to price their fixed rate mortgages, and has seen many of them pull some of their mortgages, replacing them with higher rate deals.
According to Moneyfacts.co.uk, since the beginning of last week, nearly 800 mortgages have been removed from the market, with this figure representing almost 10% of the market. A spokesman for Moneyfacts said: “Over the past few days, we have seen a few lenders withdraw selected fixed mortgages from the market, at least temporarily. This volatility is down to the concerns surrounding future interest rate hikes, and lenders are reassessing their propositions.”
The equity release market is also seeing products withdrawn or rates raised. Tony Tobin, equity release expert at Rest Less Mortgages said: “A number of products have been removed by certain lenders and equity release rates are on the rise again, so it’s not a great picture at the moment.”
With mortgage rates going up so quickly, is it even worth remortgaging?
Even though mortgage rates are increasing, remember that when your current deal ends, you’ll usually automatically roll over onto your lender’s standard variable rate. These are typically much higher than other mortgage rates, so it’s usually well worth remortgaging to avoid moving onto the SVR.
For example, someone with a £150,000 repayment mortgage with 15 years left to run who is borrowing 60% of their property value would be paying £1,379 a month if they were on the typical SVR of 7.37%. Their monthly payments would fall to £1,139 a month if they remortgaged to a best buy two-year fixed mortgage rate of 4.39% – a saving of £240 a month or £2,880 a year.
My mortgage deal is finishing soon - where can I go for help?
If your mortgage deal is ending within the next six months, it’s usually a good idea to start looking for your next deal sooner rather than later. Teddy Cenaj, mortgages expert at Rest Less Mortgages, said: “The decision to remortgage or not is often dependent on several factors. Rates have just increased by 40-50 basis points and if you believe rates will decrease again soon, it might make sense to wait.
“However, predicting interest rate movements can be quite challenging and is influenced by a variety of macroeconomic factors. One option might be to potentially look to go on a variable rate with no exit fees, at least this way it will be cheaper than the standard variable rate and if and when rates do drop they can exit onto a cheaper fixed rate – sitting on the standard variable rate is unlikely to be the best option for most people.”
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Will it take me longer to get a mortgage?
Despite the current mortgage market turmoil, once you’ve found a deal you like, it shouldn’t take longer than usual for your application to go through, providing you meet the lender’s eligibility criteria and have all the right paperwork in place. You can find out more about the sort of information you’ll need to provide to support your mortgage application in our guide How to apply for a mortgage – everything you need to know.
Teddy Cenaj said: “We are not seeing longer time frames at the moment, some lenders are taking slightly longer than they would be but nothing to have any real impact.”
If I’ve recently received a mortgage or equity release offer, can my lender now withdraw it?
If you’ve already had your mortgage agreed, then it should proceed as normal, so try not to worry, but if you do have any concerns, check with your lender or mortgage broker. The same also applies to equity release.
If you’re considering equity release as a way of raising cash, your first step should be to seek advice from a qualified financial advisor.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
They can help you understand the best option for you and recommend a suitable product from a member of the Equity Release Council (ERC). The council has a number of product standards which help safeguard borrowers so it is important that any provider you choose is a member. Advisors can also be members of the ERC. You can search for an equity release provider that belongs to the ERC here.
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
What if I can’t afford my new mortgage payments?
Thousands of homeowners are going to really struggle to afford steeper mortgage costs on top of all the other financial challenges they’re facing.
The current cost of living crisis has seen energy and food bills increase massively, and for many higher monthly mortgage payments are likely to push them into serious financial difficulties. If you’re struggling to cope at the moment, please don’t suffer in silence. Our guide Are money worries affecting your mental health? has lots of useful contacts which may be able to help.
If you know you won’t be able to afford your mortgage, get in touch with your lender as soon as possible. They may be able to provide you with options that could help you reduce your monthly payments, for example, lengthening your mortgage term. Find out more in our article What can you do if you can’t pay your mortgage?
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