Mortgage rates have been steadily increasing over the last few months as interest rates continue to grow. The Bank of England has increased interest rates 7 consecutive times since December 2021, with the most recent change seeing them rise to 2.25%. The next review is scheduled for 3 November 2022. However, more recently we have seen mortgage rates rapidly increase.
Why Are Mortgage Rates Increasing?
After the announcement of the Mini Budget on the 23rd September, the mortgage market has seen sharp increases to mortgage rates, with some mortgage providers pulling deals altogether.
The change came about due to the fall in the value of the pound. The fall was witnessed just hours after multiple tax cuts were proposed in the Mini Budget, sparking rumours of further interest rate rises. The Bank of England also issued a statement, saying they ‘would not hesitate’ to hike interest rates in the coming months.
All these factors combined have led mortgage providers to hike mortgage rates, with the average two-year fixed rate almost 6%, up from 2.34% last December.
How Will The Rising Mortgage Rates Impact Me?
If you currently have a variable rate mortgage, you will likely have witnessed an almost immediate increase in your monthly payments. For example, on a mortgage of £200,000 with a tracker rate rising from 3.5% to 4%, you would see an average increase of £60 in your monthly payments.
If you are remortgaging your home or are a first time buyer you will struggle to find a mortgage lender who hasn’t increased their costs when searching for a mortgage deal. All new fixed mortgage deals will have factored in this new costing and so will also be much steeper when compared with deals offered just a few months ago.
Mortgage rates are not changing for anyone already in a fixed rate contract. If you already have a fixed rate mortgage you should see no change to your monthly payments unless you quote for a new or renewing mortgage.
The threat of rising interest rates has not only led to rise in mortgage rates but has caused some lenders to drop deals altogether. In just a week, over 1,000 deals have been withdrawn from the market, according to Moneyfacts. Banks and Building Societies such as Halifax, Virgin Money and Skipton Building Society have dropped fixed rate deals for new borrowers.
Other lenders such as HSBC and Santander have also paused new fixed mortgages and it is expected that many more lenders will follow suit in the coming weeks.
What If I Can’t Pay My New Mortgage Bill?
If you are a variable or tracker rate mortgage, it may be time to see if switching your provider could offer some savings. However, knee jerk reactions are not always the best way to go so make sure to fully research what mortgage deals are available. Speaking to a mortgage broker could also be extremely beneficial. Not only can they offer expert advice and insights, but some of the best deals are only available through a broker.
Get Debt Advice For Mortgage Arrears
The mortgage rate increases have meant many people in the UK can no longer afford their monthly payments. If you fall into this category you must get immediate debt advice. Mortgage payments are classed as Priority Debts and therefore if you are struggling to pay you must contact your provider. They may be able to help with a repayment plan.
You can also receive free debt advice with our online tool. The tool allows you to input your current debts and payment information in your own time and will suggest the best debt solution for you. Access the free debt advice tool here and contact our friendly team for further help and support for mortgage debt.