The top 10 mortgage lenders’ two-year fixed rates have trebled since their low point last Autumn following five Bank of England (BoE) interest rate hikes, new analysis from broker L&C has revealed.
And with the BoE’s decision makers meeting tomorrow to decide whether rates should increase again, there is a chance further rises could continue at the rapid pace we have seen this year.
Indeed, L&C’s remortgage tracker revealed the average of the two and five-year remortgage rates with the lowest loan-to-value (LTV) from the top ten lenders had leapt again this month, posting the second biggest monthly rise this year.
The average two-year fixed deal climbed by 0.35% to 2.71%, whilst the five-year fix rose to 2.78%.
David Hollingworth, associate director at L&C Mortgages, said: “The rate at which mortgage rates have been moving has been astonishing and many lenders have continued to make changes to their rates week in week out, making it difficult for borrowers to keep tabs on the market.
“With the cost of living continuing to rise, mortgage borrowers will be hoping that the Bank of England will decide to ease off but it makes sense to plan for more increases.”
How remortgaging could help with the cost-of-living increase
Although rising interest rates may appear to add an additional burden to the rising cost of living, David explained – if done correctly – it could actually help you to save some much-needed funds.
In fact, he explained the mortgage remained an area where households can take positive action.
If your mortgage deal is up for renewal you can switch before rates go up further. Most mortgage deals will remain valid for six months after they have been issued so if you are due to renew in the next six months, it could be worth doing it sooner rather than later.
David added: “Fixed rates understandably appeal to those looking to put some certainty into their single biggest outgoing.
“We’ve seen more borrowers looking to secure a rate further ahead of the end of their current deal, in an effort to get ahead of the increases”
Will lengthening the term of my mortgage reduce the cost?
Another broker, Habito, has revealed how some of its customers have requested their mortgage term be increased from 20 years remaining to 30 years remaining in a bid to lower their monthly repayments.
However, the broker warned lengthening your term will increase your interest. Indeed, if you spread out the repayments over more years the interest adds up.
It may lower costs over the short term but is more expensive in the long run.
Remortgaging: What do I need to do?
Habito was ‘bracing itself’ for a busy week in preparation in case rates do go up tomorrow. It revealed on the day of the rate rise in May, its remortgage web traffic was up 160%, compared to average daily remortgage traffic.
Rosie Fish, mortgage expert at Habito warned: “Right now, the cheapest deals on the market are being withdrawn and repriced by lenders at short notice. The high level of remortgaging activity also means that processing times for applications is going up.”
Rosie’s advice is to get yourself prepared. “If you haven’t got a mortgage offer yet, but will be looking to get one in the coming months, make sure you get your documents in order,” she explained.
“Things like your ID being up to date and your address being correct on your bank statements will help avoid delays when it’s time to submit your mortgage application.
“Remortgaging with the same lender can save some time, and often doesn’t come with fees, but you can’t be sure you’re getting the best interest rate on the market.
“Switching to a new lender often means the most competitive rates and often their deals comes with cashback or freebies – like free valuations. Either way, it’s worth speaking to a broker because often, they can get exclusive rates, even if you decide to stick with your current lender.”
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