Mortgage rates are rising again: Should you act now or wait for a better deal?
Adapted from our October Newsletter
With mortgage rates climbing and uncertainty surrounding the Autumn Budget, homeowners face a difficult question. Is it better to secure a mortgage deal now or hold out in the hope that rates will fall?
Just when borrowers might have hoped mortgage rates were heading in the right direction, the market has taken another turn.
Average fixed mortgage rates have climbed during the autumn, adding another layer of uncertainty for homeowners coming to the end of their existing deals and people planning to buy a property.
According to figures reported by HomeOwners Alliance, the average two-year fixed mortgage rate was 5.97 per cent and the average five-year fixed rate was 5.99 per cent in October.
With the Autumn Budget taking place on 28 October2 and the Bank of England’s next interest rate decision due on 5 November, borrowers may understandably be wondering what to do next.
But while nobody can predict exactly where mortgage rates will go, getting professional mortgage advice could help you understand your options and make a decision based on your circumstances rather than speculation.
Why are mortgage rates rising?
Many borrowers assume mortgage rates move directly in line with the Bank of England’s base rate.
But that is not necessarily how it works.
The Bank of England held its base rate at 3.75 per cent in September, yet fixed mortgage rates have risen as financial markets reassessed the outlook for future interest rates.
Fixed-rate mortgage pricing is influenced by several factors, including swap rates, which reflect expectations about future borrowing costs.
This means lenders can increase or reduce mortgage rates even when the Bank of England leaves its base rate unchanged.
For homeowners, it makes predicting the right time to secure a mortgage deal particularly difficult.
Is waiting for rates to fall worth the risk?
If your current mortgage deal is ending soon, you may be tempted to wait and see whether lenders reduce their rates.
But there are risks to delaying.
Mortgage rates could fall, remain broadly unchanged or rise further. If you wait too long, you could also find yourself moving onto your lender’s standard variable rate when your existing deal expires.
Standard variable rates are often higher than rates available on new mortgage products, although this is not always the case.
Equally, securing a mortgage deal now does not necessarily mean you will be getting the cheapest available rate when your mortgage completes.
This is why speaking to a mortgage broker can be particularly useful when rates are changing.
An adviser can help you understand which deals are currently available, how long a mortgage offer might remain valid and whether the lender permits changes to the selected product before completion.
Could You Save on Your Mortgage?
Use our mortgage quote tool to get an idea of the types of rates currently available based on your circumstances. This is not financial advice, and the results are for illustrative purposes only. Rates can change and may not be suitable for your needs.
Why advice matters when rates are unpredictable
A mortgage broker cannot forecast exactly what the Bank of England or mortgage lenders will do next.
But they can help you make an informed decision using the information available today.
That includes comparing suitable fixed and variable mortgage products, assessing overall costs and considering how your budget might be affected if interest rates change.
For example, a fixed-rate mortgage provides certainty over the interest rate and repayments during the fixed period.
A variable or tracker mortgage may offer different features, but repayments could increase if the applicable rate rises.
Neither option is automatically better.
The most appropriate choice depends on factors such as your financial circumstances, future plans, attitude to changes in monthly repayments and how long you expect to keep the mortgage.
A broker can explain these differences and help you consider the potential benefits and drawbacks of each option.
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What to do next
Russell Green will personally deal with your enquiry.
Tel 01934 442023
Email russell@westonmortgagesonline.com
Our initial mortgage consultation is free and with no obligation; should you proceed to an application, there will usually be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances, but will range from £ 290 to £490, and this will be discussed and agreed with you at the earliest opportunity.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
