As many as 750,000 households in the UK could see their monthly mortgage payments rise by an average of £170 this year, according to the Bank of England. These households are currently paying interest rates of less than 3%, but many face a significant jump when they are forced to refinance at today's much higher rates as their cheap fixed-rate deals come to an end.
Rising Mortgage Rates and Market Trends
The Moneyfacts Average New Mortgage Rate has increased from 5.47% in July to 5.59% in August, wiping out the previous month's 0.12 percentage-point fall. Rachel Springall, Finance Expert at Moneyfacts, explained that lenders were forced to reverse fixed rate cuts in July, ending three consecutive months of reductions to the average two- and five-year fixed rates.
Springall attributed the volatility to persistent concerns over the future outlook of interest rates, driven by unrest in the Middle East. She noted that the limited timeframe makes it essential for borrowers to seek advice early, particularly those due to remortgage this year.
Advice for Borrowers Facing Remortgage
Springall advised that borrowers could choose to refinance with their existing lender for ease, but it is always wise to shop around first to get a sense of the new rates on offer, especially if coming off a low-rate deal. She warned that waiting could prove costly, as the average mortgage revert rate remains above 7%. The average Standard Variable Rate is currently 7.13%, according to Moneyfacts, although that is down from 7.42% a year ago.
The Bank of England's Bank Rate is currently 3.75%, having been held at that level at its July meeting. The Bank has warned that higher energy prices caused by the Middle East conflict could push inflation higher later this year.
Future Rate Hikes and Market Outlook
Springall said the prolonged conflict has driven up oil and energy prices, raising inflationary fears which could in turn lead to future Base Rate increases by the Bank of England. She added that mortgage availability had improved but said there was always more room for improvement in the range of deals available to borrowers with smaller deposits.
