A warning has been issued over property sales falling through this summer after mortgage rates are rising again. The average two-year fixed-rate mortgage was edging just below the 6 percent mark on Friday (June 16) as lenders continued to hike their rates, according to a financial information website.
Across all deposit options, the typical two-year fixed-rate deal jumped up from 5.92 percent on Thursday (June 15) to 5.98 percent today, said Moneyfactscompare.co.uk.
It comes after mortgage rates skyrocketed following the market turmoil after the mini-Budget in September 2022. Average two and five-year fixed mortgage rates topped 6% last autumn before later settling down.
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The pressure on mortgage holders is expected to tighten even further next week, as experts predict the Bank of England will raise interest rates for the 13th consecutive time.
Some are expecting UK interest rates to rise by another 0.25 percentage points next week, taking the rate to 4.75 percent, and say there could be more hikes on the horizon.
Amid mortgage rates rising again, a property expert has now warned that homeowners, especially first-time buyers, may start to pull out of deals this summer.
“Rising mortgage rates will hit the buying power of new buyers who don’t have a mortgage arranged," Richard Donnell, director of research and insight at Zoopla said.
"Those that have got offers locked in at closer to 4 percent will most likely push ahead with purchases where they feel secure in their work and/or need to move for job or family reasons.
“Those who were going to move but for less needs-based reasons may look to pull out of deals and wait over the summer.
Richard added: “For those with a home and re-mortgaging, there will be a jump in mortgage costs as people move from sub-2 percent or 3 percent to 5 percent mortgage rates.
“Some homeowners are injecting cash to pay down debt to reduce loan repayments at higher rates.
“Others may have to look to extend mortgage terms by two to five years to reduce the increase in repayments – this is a solution but comes with the cost of paying more interest to the bank.”
Rachel Springall, a finance expert at Moneyfactscompare.co.uk said: “Despite lenders such Barclays and TSB having reduced selected fixed-rate mortgages since the start of the week, most fixed-rate changes we’re seeing in the market are still increases.
“Average rates are still around the highest they’ve been so far in 2023, so it will be interesting to see how rates and availability fluctuate in the coming weeks.”
According to Moneyfacts’ figures, 4,923 residential mortgage deals were available on Friday, shrinking back from 5,080 on Thursday.
Ms Springall continued: “Amid interest rate rises, fixing for the longer term may be an attractive choice for those who want peace of mind with their mortgage repayments.
“However, whether now is the time to take out a new deal really will depend on someone’s circumstances, particularly for first-time buyers who may be struggling to build a deposit and who have limited disposable income.
“That said, because of higher house prices, those remortgaging may find they have more equity in their home to drop down into a lower loan-to-value bracket, where more competitive interest rates could be found.”
Nationwide Building Society is among many lenders to have increased its rates, with the mutual making rate changes across its fixed-rate mortgage range, effective from Friday. Its rates have now increased by up to 0.7 percent.
Swap rates, which underpin the pricing of fixed-rate mortgages, have been rising, amid expectations around inflation.
A Nationwide spokesperson said: “With the continued upward trajectory of swap rates in recent times and lenders across the market increasing rates, we are having to make some increases across our fixed-rate mortgage range.
“These changes are in line with the movement in swap rates and ensure that, as a building society, we can continue lending to all types of borrowers.
“Despite the changes in rates, our full mortgage range continues to remain available.”
The Bank of England is “caught between a rock and a hard place, as it has to choose between pushing more mortgage borrowers towards the brink and letting inflation run riot”, according to Laith Khalaf, head of investment analysis at AJ Bell.
The average mortgage holder is looking at a £200 increase in their monthly repayments if their rate goes up by three percentage points.
Myron Jobson, senior personal finance analyst for Interactive Investor, said more “mortgage misery looms” for borrowers set to renew their deal in the second half of this year, “the majority of which were set at interest rates below 2%”.
But the Bank of England has said it will continue to raise interest rates so long as it sees signs of inflationary pressure.
Financial markets are now predicting there to be four further rate hikes, taking it to a peak of 5.75%, analysts said.
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