According to the latest information from Moneyfacts, the average five-year fixed mortgage rate has experienced a rise, now standing at 6.01%. This represents the peak level since the previous November, with the average two-year fixed deal witnessing an increase from 6.42% to 6.47% just from Monday to Tuesday.
This augmentation in fixed-rate mortgage rates has driven an increased number of homeowners toward considering variable rate agreements. Recent statistics from the trade body, UK Finance, revealed that 13% of new mortgages secured in the April quarter were variable rate deals, with homeowners gambling on a long-term reduction in mortgage rates.
David Hannah, Chairman of Cornerstone Group International, emphasised the importance of home buyers rigorously evaluating the sustainability of mortgages over time.
Coinciding with these rising rates is the withdrawal of almost 10% of mortgage deals from the market by lenders, motivated by fears of climbing interest rates. Moneyfacts notes that roughly 800 domestic and buy-to-let deals have been pulled in total.
This scenario projects that UK homeowners will be saddled with an additional £9 billion in interest payments throughout 2023 and 2024, according to forecasts from the Centre for Economics and Business Research.
In the timeframe of 2023 and 2024, fixed-rate deals for around 2.5 million homeowners will come to an end, with an extra one million on variable-rate deals facing a similar situation.
Cornerstone Group International’s Chairman, David Hannah, further commented, “In the constantly shifting landscape of the UK housing market, one of the most challenging hurdles for homeowners is the upward trajectory of mortgage rates. News from Moneyfacts that 5-year mortgage rates have now exceeded the 6% threshold will not be comforting for those seeking a mortgage.
“The rise has nudged more potential home buyers towards variable rate mortgages, in the hope of benefiting from falling mortgage rates in the future. However, it remains crucial to meticulously evaluate the long-term affordability and practicality of mortgage options, keeping in mind the potential impact on family budgets and future financial arrangements.”
