Mortgage deals in demand as rates soar - InterestRate.co.uk
Mortgage

Mortgage deals in demand as rates soar

Since December 2021, the Bank of England has imposed a series of interest rate hikes that have increased the base rate from 0.25% to 1.25%. As inflation continues to soar, having already reached its highest level in four decades, there are more rate hikes on the cards. In addition, the central bank governor, Andrew Bailey, has hinted that the next one could be double that of previous increases.

As a result of soaring interest rates, the demand for mortgage deals has rocketed. According to a recent report in The Guardian, mortgage brokers are now struggling with demand as more people seek out the most favorable low-rate mortgages in a challenging market.

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Mortgage rates

Lenders reducing lower rate deals

The interest rate increases that have taken place since last December have led to lenders reducing the number of lower-rate deals that they offer. Moreover, brokers claim that they sometimes receive only an hour’s notice before lenders increase their mortgage rates in response to the base rate hikes.

According to Chris Sykes, a mortgage broker for Private Finance, most good deals from last year, such as 1.2% offers, have disappeared. He said that many people are lucky if they can get a 3% deal, which is more than double the best deals from last year. Sykes added that he had never seen rates rise so quickly.

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Data from the Bank of England also backs this up, with figures showing that mortgage rates in the UK increased by 46 basis points between November and May. This reflected the fastest half-year increase in a decade. Data also shows that an average two-year fixed-rate mortgage deal worth 75% of the property cost increased from 1.2% to 2.63% in the eight months to May. This was the fastest increase over that period since 1995, when records began.

Mortgage rates set to get higher

reducing lower rate

The nation is anticipating a hefty base rate hike of 0.5% at the next Monetary Policy Committee meeting. This means that mortgage rates will rise even more, bringing increased challenges for both borrowers and mortgage brokers.

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David Hollingworth of the broker L&C Mortgages said, “Changes that we’ve seen from lenders across the market have been relentless, and there’s no sign of that slowing up.” While banks have been hiking their mortgage rates at an alarming pace, brokers have acknowledged that the lenders are not to blame. Nicholas Mendes of the mortgage broker John Charcol said, “Lenders do have a difficult job. Given how quickly things change, they can become market-leading and be overwhelmed if they price incorrectly.”