Tag Archives: mortgage rates

Interest rate news – the latest increase by Bank of England

Interest rate news – the latest increase by Bank of England

The latest interest rates rise has seen an increase from 5% to 5.25% from the Bank of England, the 14th consecutive increase from the institute. Now at their highest point in 15 years, our latest blog post provides insight in to the predictions made by economists regarding future inflation and interest rates in the coming months.


guidance for mortgage customers and their monthly repayments

How does this affect my current mortgage offer?

When it comes to your current deal, those on a tracker or variable mortgage, or anyone due to renew next year, is particularly vulnerable to changes in interest rates.

This increase means that these mortgage-owners can expect rising prices, resulting in you having to pay back more money to your lender every month. An option to try and release some of this burden would be to extend terms, giving you an extended period in which to make your payments.

In regards to fixed rate mortgages. Current deals being offered by lenders have already increased to reflect the rate rises, with the average two and five-year fixes between 6 and 7%.

Click here for more information regarding mortgage types.


the interest rate rise and how it will affect first time buyers in the property market

How will it affect my likeliness to get my first mortgage deal?

If you are looking to get your first mortgage deal then all of the above will apply. You can expect to require a larger deposit to offset the borrowing costs from your lender and to have a higher interest rate, even with fixed rate deals.

Essentially rising interest rates makes borrowing more expensive, which in turn makes monthly repayments increase as well as the total amount a buyer pays in interest over their mortgage term.

Your likeliness to be given a mortgage deal by a lender will be determined by the following:

  • Age
  • Income
  • Debts
  • Employment status
  • Credit score

However this can be assisted in some way with a LTV or a zero deposit mortgage – targeted at first time buyers.


Loan-to-value (LTV) mortgage

A loan-to-value (LTV) mortgage, otherwise known as a 95% mortgage, requires buyers to raise only a 5% deposit.

The LTV (Loan to value) is a ratio of a home loan relative to a property’s value. For example, a mortgage worth £190,000 on a £200,000 home has a 95 per cent LTV. Buyers then make up the five per cent difference with a deposit — in this case, £10,000.


Zero deposit mortgage

Predominantly aimed at renters who lack savings or financial support from their family but hoping to purchase their first home and enter the property market.

The deal is available for first-time buyers across the UK. Tenants aged 21 and over may be able to take out mortgages at between 95 per cent to 100 per cent of the value of the property they want to buy.

This product would not allow borrowers to pay more for their average monthly payments than they were handing over in rent.

Applicants will also need to demonstrate at least a 12-month track record of paying their rent and bills on time.


when can it be expected for rising rates around mortgage deals to decrease?

When can it be expected for interest rates to come back down?

Predictions surrounding interest rate rises and decreases are very much that, predictions, however some key investors have expected a peak of around 5.75% towards the end of 2023. At this point it is then expected that a decrease will be on the horizon.

Nina Scaroni, chief executive of the Centre for Economic and Business Research states that her timescale for this would be Summer of 2024 when speaking to Sky News.

However this will all be determined by inflation and the rate at which this comes down. It is unlikely that the Bank will lower the base interest rate until this is visible. The reason for this is to avoid people spending more and the inflation rising even higher.

The silver lining in all of this though is that The Bank of England will be keen to get interest rates down sooner rather than later, as keeping them high for a long period of time increases the risk of negative economic growth and a recession. And they predict that inflation will decline throughout the rest of 2023 – and so it’s likely to lower rates slowly in response to that.


mortgage advice bureau are on hand to advise regarding mortgage costs and rate rise

Looking for guidance on your current mortgage deal?

At the Mortgage Hub we work as an independent broker, looking to provide you with the most informed and trusted guidance based on current market offerings.

If you are looking to review your current mortgage offer or indeed are looking to get that first step on the property market, our team are on hand to advise.

Our Hamilton office is open Monday to Saturday, get in touch on 01698 200050 or e-mail info@mortgagehub.co.uk to arrange an appointment and speak to one of our mortgage advisors.

Our team will then do all the work to research your options and will work hard to negotiate the best deal for you and your savings.

Interest Rates and Your Finances – what does the rise mean for you?

Interest Rates and Your Finances

Following the May rise in interest rates to 4.5%, many people are now wondering what that means for their mortgages.

Lenders regularly review the interest rates of their mortgage products, adjusting the deals available to those looking to buy their first home or remortgage their existing property.

The Bank of England (BoE) meets every six weeks to decide whether the Base Rate should go up or down or stay the same. Last month, the interest rate went up 0.25% percentage points, from 4.25% to 4.5%.

What does the interest rate increase mean for your mortgage payments?

This rate rise is unwelcome news for those with a mortgage on a variable rate – this could be a base rate tracker, discounted-rate deal, or a lender’s standard variable rate (SVR).

For those on a tracker mortgage, their deal directly follows the base rate, and at 5.25%, their repayments will rise by £21 per month if they have a £150k repayment mortgage with a 20-year term. Compare this to last year; that same homeowner will have been paying £776 a month, indicating a rise in the previous 12 months.

A Standard Variable Rate mortgage goes up at the lender’s discretion. However, these are likely to go up even if not by the total 0.25% percentage points.

For those on a fixed-rate mortgage, this news will not impact their mortgage repayments each month. This accounts for around six million households in the UK – but if their current deal is about to end, they will feel the impact of the increase in their monthly payments. If they are coming to the end of a 2-year fixed rate, they could be used to paying around 1.5 to 2% and will experience a big jump.

US investment group Goldman Sachs anticipates rates will rise to 5% this summer.

Mortgage rates are increasing by an average of 0.39% across all LTVs, and these latest interest rate changes hardest hit those with a 10 or 15% deposit. However, some lenders are trying to remain as competitive as they can.

What does the increased interest rate mean for savings rates?

 The Bank began raising interest rates at the end of 2021, and at this time, the best easy-access savings rate was 0.67%. Following the rate rises, the rates for savers have improved, and the highest easy access savings rate is now 3.71% – this is significantly below the inflation rate of around 10%. Following the recent rate rise, several savings providers have raised rates to be competitive and attract new customers.

For those who don’t need an easy access account, rates of 4.91% are available – but this means tying up funds for two to five years.

The Commons Treasury select committee has recently campaigned to encourage high street banks to increase the savings rates offered to loyal customers. While the online accounts above pay relatively attractive interest rates, easy-access accounts at many big banks still provide meagre returns.

How does the increased interest rate affect credit card and loans?

When interest rates go up, so do the rates on borrowing via credit cards and loans. If you already have a loan, it’s likely to be on a fixed rate, so your repayment won’t change. If you have a credit card, it may be worth moving it to an interest-free offer. However, you will need to pay a transfer fee.

Are house prices falling as a result of the increased interest rate?

According to the latest House Price Index from Zoopla, buyers and sellers are pressing ahead with their plans despite the rate rise. Recent inflation figures might still put a brake on market activity however.

The Index shows that:

  • UK house prices have dropped 1.3% over the last two quarters but this is now a slow reduction.
  • Lower mortgage rates in the first half of this year supported an increase in housing market activity.
  • Confidence is improving.
  • Housing market conditions vary across the country with weaker demand in areas where house prices have risen the most.
  • The likelihood of further interest rate rises may weaken demand and market activity at the end of 2023.

House prices are currently falling slower than they did at the end of last year, indicating some improved confidence from both buyers and sellers. In fact, the number of property sales in the UK has increased due to lower mortgage rates over recent months. The strong labour market has also prevented prices from falling further.

The annual rate of house price growth is 1.9% for the UK – down from 9.6% last year – ranging from -0.2% in London to 3.6% in Wales. House prices are expected to remain broadly the same for the rest of the year despite inflation data currently being higher than predicted. Mortgage rates could rise in the coming months which will impact house prices.

Looking for more information/ mortgage advice?

If you want to know how the recent interest rate rise might affect you, talk to the team at The Mortgage Hub. We can help you with your new mortgage or find a deal if you are coming to the end of your existing deal.