Shortly after we released the “Secure A Remortgage – During Unprecedented Times” post, data from Moneyfacts revealed that the average 2-year fixed rate in the UK climbed to 6.66% on Tuesday. This exceeded the previous rate of 6.63% and marked the highest level in 15 years, surpassing figures seen during the global financial crisis.
With average 2-year fixed rates reaching 6.66%, some homeowners may feel overwhelmed by the financial strain. The Government and the Bank of England (BOE) have played a role in this situation. As many understand, politics often involve red tape, delays, or efforts to score points rather than urgent action. During such challenging times, many homeowners wonder where to seek reliable support.
Expert Mortgage brokers
Although the question is warranted, we believe the government should take a leading role. During the transition period, however, mortgage brokers are well-placed to respond effectively. Their role is to provide mortgage holders with greater flexibility. This includes advising on reducing mortgage terms and facilitating temporary moves to interest-only mortgages.
This support can ease the burden of higher monthly payments caused by recent rate increases. Mortgage brokers aim to protect the stability of individuals in their homes, working to prevent widespread repossessions. However, they cannot resolve every situation. It is important to recognise that some homeowners may still face the risk of losing their homes and experiencing homelessness.
In today’s complex mortgage market, homeowners face many challenges that can make restful nights seem impossible. As committed mortgage brokers, we focus on two key factors that significantly affect the housing market:
- Rate Rises
- Product Choice
Rate Rises: Understanding the Impact
According to Moneyfacts, the average 5-year mortgage rate experienced a slight rise to 6.17% on Tuesday, showing a marginal increase from Monday’s rate but still below the peak of 6.51% reached in October.
Following the crisis sparked by the “mini-budget,” UK mortgage costs had shown signs of recovery, but they have recently surged due to 13 consecutive rate hikes by the Bank of England (BOE).
The BOE surprised many as the rate hit ‘shock’ 5% after a 0.5 percentage point increase, a larger increase than anticipated. This decision directly affects numerous homeowners as interest rates on many mortgages are directly linked to the BOE’s base rate.
Renters are also expected to face higher rental payments as buy-to-let landlords pass on the increased mortgage repayments.
The BOE’s actions are a response to combat stubbornly high inflation. On Monday, Governor Andrew Bailey emphasised that the BOE must stay committed to lowering prices. Many experts believe that additional interest rate hikes are likely in the coming months.
With the ever-changing economic climate, interest rate fluctuations directly impact mortgage affordability. Rate rises can increase monthly mortgage payments, potentially pushing some buyers out of their affordability range. Armed with in-depth knowledge of the mortgage market, as mortgage brokers, we can help existing and prospective buyers understand the implications of rate rises on their financial situation. Until the government and the BOE find a working resolution to this crisis, we can assist in assessing different mortgage options and strategies to mitigate the effects of rising interest rates.
Product Choice: Finding the perfect fit
The range of mortgage products available in the market can be overwhelming for potential homebuyers. Each product comes with its own set of features, benefits, and drawbacks. As mortgage brokers, we serve as valuable guides in navigating the sea of mortgage options. We have access to a wide array of lenders and products, allowing us to tailor the mortgage solution to the specific needs and circumstances of the borrower.
Brokers can provide expert advice on fixed-rate mortgages, tracker rate mortgages and other specialised products, ensuring borrowers make an informed choice that aligns with their long-term goals.
The work of mortgage brokers?
The government is increasingly looking to mortgage brokers to offer support to those experiencing financial difficulties. Mortgage brokers are seen as vital resources during these challenging times.
Brokers possess in-depth mortgage market knowledge and stay informed about the latest trends. They build strong relationships with borrowers, gaining a clear understanding of their unique needs and financial circumstances. With rising interest rates and fewer product choices, brokers play a key role in helping homeowners achieve peace of mind. This highlights why the government depends on their expertise.
Mortgage brokers can be viewed as modern-day heroes. They assist individuals in managing their mortgages and protecting their homes.
At Connect Mortgages, we provide personalised advice and customised product options. We ensure these solutions meet the specific needs of borrowers. We also assess how interest rate increases affect mortgage payments and future affordability. By offering ongoing support, we make a meaningful difference in helping individuals manage their mortgage responsibilities and secure their financial stability.
Thank you for reading our publication “The Challenges Homeowners Face | Extraordinary Rate Rises.” Stay “Connect“-ed for more updates soon!
