Over the last several weeks, mortgage rates have begun a new upward trajectory, leaving future homebuyers and current mortgagees anxious and uncertain. According to Moneyfacts, the average two-year fixed-rate mortgage is now at 4.98%. By contrast, five-year fixed-rate mortgages currently average 5.02%. In fact, this is the first month since February that average mortgage rates have risen. With rising interest rates and escalating inflation, lenders have gravitated towards a more cautious approach.
Average rates of new deals have actually increased, according to Rachel Springall, finance spokesperson at Moneyfacts. They remain up by only 0.02 percentage points since last month. Even with this tiny increase, she said, borrowers should still be prepared for some underwhelming news in the current environment. “Volatile swap rates and a cautionary approach among lenders have led to an abrupt halt in consecutive monthly average rate falls,” Springall stated.
That’s down from the average rate on a two-year contract two years ago, which was 6.67%. Today, over four-fifths of mortgage borrowers benefit from the benefits of long-term fixed-rate agreements. This positive trend offers rare stability amidst raging uncertainty. Homeowners have had a great run of low rates during the 2010s. As the tide turns, they could be the ones left holding the bag.
Hundreds of thousands of would-be first-time buyers are clamoring to finally get their first mortgage and buy a home. Due to high interest rates and economic distress, millions are having a hard time making their move in this hyper-competitive real estate market. It’s important borrowers look at their own situations and get independent advice when needed, says Springall. She explained the dangers of agreeing to be rushed to complete a contract under rumors swirling around the Budget.
Simon Gammon, managing partner at mortgage advisers Knight Frank Finance said it was a time of caution for lenders. With winter closing in, lenders are pulling back on risk. That prudent approach will likely impact the availability and pricing of mortgage products in the months ahead.