Mortgage rates are continuing to rise this month as they edge up from the record low experienced in July, expert analysis has revealed.
Would-be borrowers are being urged to seek advice from professional mortgage brokers as evidence shows the number of products available is also dwindling in response to the economic uncertainty caused by the financial impact of Covid-19.
Figures from Moneyfacts.co.uk reveal the average two-year fixed rate is currently at 2.38% across all loan types. This compares to 2.43% in March before the pandemic took hold and 2.02% in June, just as rates hit their record low.
But, as rates begin rising back to March 2020 levels, the availability of mortgages – particularly those designed for borrowers with small deposits – were becoming scarce.
Moneyfacts revealed there were 5,222 mortgages in total in March and this fell to 2,810 in June then further down to 2,259 this month. In the last month alone total products have fallen by 153.
For borrowers with a 10% deposit looking for a loan of 90% of their property’s value, the number of deals has plummeted from 779 in March to 51 this month. And for anyone with a smaller 5% deposit there are only 12 options available which is a far cry from the 391 on the market in March.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “The housing sector may currently be experiencing a mini-boom, but remains a volatile and fluid landscape, therefore, any customer hoping to progress with a purchase or remortgage imminently would be very wise to seek support and guidance to assess what options may be able to suit their circumstances.”
Why are there so few mortgages?
Lenders are concerned about the economic outlook at the moment. This is because it is currently unclear how borrowers might be impacted by the winding down of furlough and the unemployment which may result from this as well as any house price falls. For this reason they are mitigating the risk by reducing their high loan-to-value mortgages.
The economic uncertainty is also the reason mortgage lenders are increasing their rates.
Williams explained: “This increase in rates is likely in part due to proportion of a rate that a provider needs to attribute to the risk of default, which may be a concern as a result of the economic outlook remaining so unclear.
“For example, the spectre of negative equity should house prices drop from their current levels is one that responsible lenders will be keen to mitigate, yet have no control over. Similarly, uncertainty around future employment levels and income as government support schemes begin to unwind is another factor lenders may be considering.
How can I make sure I get a good deal?
If you are looking for a mortgage for a house purchase or remortgage the best place to start is by speaking to a whole of market broker. This is because they have access to the widest range of deals on the market and may also be able to offer exclusive rates. Not only that, but they will be able to find a deal which suits your personal circumstances.
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