There’s is currently a window of opportunity to lock yourself into a decent mortgage rate. But, as Hiten Ganatra explains, you’ll need to act fast
In the current environment of Bank of England base rate rises and soaring inflation, there has never been a better time for borrowers to lock in a fixed rate to ensure they get a good mortgage deal.
But they will need to act quickly.
Average interest rates on UK mortgages are now sitting at a five-year high, as lenders move to price in three back-to-back base rate rises from the Bank of England since December 2021, with rates on offer rising quickly and good deals disappearing fast.
The average two-year fixed mortgage is now sitting at 2.86%, an increase from 2.58% this time last year and the highest level seen since 2015, according to financial website Moneyfacts.
Five-year fixed term mortgages are also at the highest level seen since 2016, at 3.01%, while those on a 2.25% variable rate mortgage deal of £200,000 have seen an additional £300 a year added to their mortgage.
This uptick in rates and additional outgoings has come at a time when UK households are seeing the greatest increase in living costs in over 50 years.
And with the price of fuel, energy and food continuing to soar, driven by rising inflation, it is vital that borrowers ensure they safeguard their homes by locking in a mortgage rate they can afford.
Will interest rates keep rising and how will it impact my mortgage?
On 5 May, the Bank of England announced that it was yet again increasing the base rate from 0.75% to 1% in a bid to curb rising inflation, which hit 7% in March.
Market speculation suggests many more will follow and all these increases will almost certainly be immediately passed onto borrowers.
The impact of this is significant, as it means borrowers are going to have to move quickly to secure the best mortgage deal they can afford. The ultra-low interest rate environment of the past few years has gone, and lenders are no longer fiercely competing on low interest rates in order to win customers.
Instead, the upward trend in the base rate is driving lenders to pull mortgage deals quicker than ever before and replace them with more expensive options.
Over 500 mortgage products were withdrawn from the market in February alone, which means that borrowers looking to secure a mortgage cannot afford to waste any time in locking in a deal and should speak to a broker as soon as they can.
With the average shelf life of mortgage products having fallen to 21 days compared to 48 days in April 2020, borrowers only have a small window of opportunity to ensure they get a good rate on their mortgage, so seeking advice is more important than ever.
Using the services of a broker can not only help you to find the best deal available, it may be the difference between securing a rate you can afford or missing out entirely.
A broker can help you navigate the complexities of the lending market while also ensuring you get the best deal by taking control of the application process and ensuring all documentation is submitted correctly and on time, thereby increasing the chances of locking in your preferred rate before it is withdrawn from the market.
Hiten Ganatra is MD of Visionary Finance
