The average rate on a two-year fixed rate mortgage hit 6.66% today – the highest level in 15 years.
Mortgage rates have been climbing daily over the past month and experts believe there are more increases to come.
Figures out today make grim reading for anyone about to take out a mortgage. A two-year fixed rate has gone up between yesterday and today (Tuesday 11 July) from 6.63% to 6.66% whilst a five-year fix now has a typical rate of 6.17% – up from 6.13% yesterday, according to Moneyfactscompare.co.uk.
Charlotte Nixon, mortgage and financial planning expert at Quilter, said: “With the average two-year fixed mortgage rate hitting a devilish 6.66% according to Moneyfacts, many mortgage holders and potential house buyers must be wondering when the flames will die down and things start to look a bit more normal.
“Unfortunately, the UK is in a difficult place with its battle against inflation and as such interest rates are going to have to keep going up in the short-term. This is going to feed into the mortgage market and as such this is not the top of the peak – more pain is to come.”
Advice for borrowers whose mortgage deal is ending soon
Nixon’s advice to anyone who is watching these figures tick upwards daily and knows they will be affected by this in the next six months is to start arranging your deal now.
“The message is clear,” she said, “act now or you could face exorbitant costs on the standard variable rate that you will default on to.
“For those looking to take out a mortgage now, there are options to consider to lessen the burden, though they do come with consequences.”
One option is to increase the term of your mortgage. The advantage of this is that it will reduce monthly repayments. The pitfalls, however, are that not all lenders offer longer terms and it will mean you will pay more interest overall.
Taking advice from an independent whole-of-market broker, therefore, is highly recommend at this time.
Indeed, brokers are also offering reassurance to would-be customers that ‘average rates’ do not necessarily illustrate what an individual mortgage may cost.
Michelle Lawson, director- mortgage and protection adviser at Lawson Financial Ltd, said: “We have to be careful not to sensationalise the interest rates and quote ‘average’ rates as this will include higher interest rates for higher risk business such as those with applicants with impaired credit.
“In truth, on my sourcing system this morning, I have two-year fixed rates for a purchase at 50% loan to value starting at circa 5.7% to 5.8%.
“For product transfers, staying with the same lender, at the same loan to value, starting at 4.7% to 5.64%, and changing lender at 5.8% to 5.9%.
“The public need to make sure they have accurately represented information and take advice so they can make informed decisions. The sad thing is it is the people coming through for mortgages in the coming months who will suffer with this mess that has been caused.”
