Cost of home loans nears 6% in fallout from mini-Budget after mortgage rates rise and brokers warn of a second week of mayhem for homeowners
- Mortgage rates have risen by nearly a whole percentage point since mini-Budget
- Brokers warned homeowners face further mayhem amid soaring interest rates
- Lenders pulled nearly 2,000 mortgage products in a scramble to reprice deals
Mortgage rates have risen by nearly a whole percentage point in the ten days since the mini-Budget, figures showed today.
Brokers warned that homeowners face a second week of mayhem as lenders try to get to grips with market expectations of soaring interest rates.
The typical cost of a two-year fixed home loan has risen to 5.75 per cent, up from 4.74 per cent on September 23, the day of Chancellor Kwasi Kwarteng’s announcement.
This is more than double the 2.34 per cent average rate on offer last December, according to analysts at Moneyfacts.
Meanwhile, the price of a five-year fixed rate mortgage deal shot up to 5.48 per cent today from an average of 4.75 per cent on the day of the mini-Budget.
Mortgage rates have risen by nearly a whole percentage point in the ten days since the mini-Budget, figures showed today
Panic swept the property market last week amid concerns the Bank of England would hike its base rate to 6 per cent next year.
Lenders pulled nearly 2,000 mortgage products last week as they scrambled to reprice their deals to reflect future interest rate rises.
Some, including Virgin Money and HSBC, cautiously returned to the market at the end of last week – but with inflated rates.
NatWest announced on Sunday that it was increasing its fixed-rate deals by up to 1.78 percentage points.
According to Bank of England data, more than two mil – lion homeowners with fixed-term loans will remortgage between now and the end of 2024. They face paying thousands more when budgets have already been battered.
Yesterday the Chancellor announced he was performing a U-turn on his most controversial policy, cutting the 45p rate of income tax.
Brokers reportedly fielded inquiries from clients asking if they could pull mortgage applications submitted over the past week.
Experts said borrowers were wrongly hoping that the Chancellor’s U-turn could spark lenders to lower their rates over the next few weeks.
On the first day of last month 3,890 mortgage products were for sale. That crashed to around 2,000 and yesterday the figure stood at 2,262
Dominik Lipnicki of Your Mortgage Solutions said: ‘The Chancellor’s decision yester – day was a political one which will have little effect on the City. People are still very much stressed and panicked as they are starting to understand they are facing a huge shock in their mortgage bills which is unavoidable at this point.’
The rate rise is likely to put the brakes on property sales, said Dominic Agace, chief executive of estate agency Winkworth. ‘It’s what happens every time there is a step-up in mortgage rates’, he told the Financial Times.
He added that the slowdown would be more acute in areas of the market where sales peaked during the pandemic, such as large country homes.
On the first day of last month 3,890 mortgage products were for sale. That crashed to around 2,000 and yesterday the figure stood at 2,262.
Rachel Springall, a finance expert at Moneyfacts, said: ‘Borrowers may be concerned to see a further fall in mort – gage availability but many lenders have been very vocal that their withdrawals are on a temporary basis amid interest rate uncertainty.
‘Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred from the level of choice and much higher mortgage rates than they were perhaps anticipating.
‘The next few weeks will be crucial to see where lenders go from here, but we have already seen some new fixed deals arrive since last week.’
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