This could be the end of the golden age for cheap mortgages
Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on Bank of England’s Credit Conditions Survey publication, which shows that this could be the end of the golden age for cheap mortgages.
Key points from publication:
- Demand for mortgages for new properties is falling, while remortgaging is on the rise.
- Mortgages have been getting cheaper. The gap between the Bank of England base rate and mortgage rates is narrowing.
- It has been gradually getting easier to get a mortgage, particularly for those with less equity.
Sarah Coles comments:
“We may be reaching the end of a golden age for cheap mortgages. Right now, mortgages have been getting cheaper, and banks are increasingly willing to lend, so there’s never been a better time to consider remortgaging onto a cheaper fixed rate deal if you can. But with the threat of interest rate rises around the corner, you’ll need to be quick.
“Average mortgage rates have been falling. According to Moneyfacts, the average two-year fix is down 0.13 percentage points in the past month to 2.38%, and the average five-year fix down 0.8 percentage points to 2.55%. The best deals are reserved for those with the most equity in their home, but even those who have 10% equity have seen average rates drop.
“At the same time, the Bank of England figures show that banks have been more prepared to lend, particularly to people with less equity in their home. This is largely because they’re more confident about the economic outlook, but also because they want to increase their market share, and they’re more prepared to take on risks. Their confidence in the future of house prices helps too.
“However, this golden age for cheap mortgages is unlikely to last, because the markets are pricing in an interest rate rise before Christmas, and another one in early 2022. And the banks won’t wait for any rate rise before they start pushing up the cost of mortgages. So far only the cost of ten-year fixed rates has started to rise, but we can expect shorter fixes to get more expensive as the banks become increasingly convinced that a rate rise is imminent.
“October was already set to be the busiest month of 2021 for remortgaging, according to CACI, because of the sheer number of fixed rates coming to an end, so it’s worth acting fast to snap up the best deals. January 2022 will see even more fixed rates expire, so if your deal comes to an end then, don’t wait to shop around for a new fixed rate. You can lock in a new deal any time within the last six months of your existing one, so it may well pay to get cracking now.”
Kindly shared by Hargreaves Lansdown
Main photo courtesy of Pixabay
