Interest rates on mortgages have surpassed the 6% mark for the first time since the past six months.
In recent weeks, the mortgage lending market in the UK has been experiencing a turbulent period, with numerous mortgage deals being withdrawn by lenders and rates rapidly increasing. One of the leading banks, Santander, has pulled mortgage deals for new borrowers, adding to the growing concerns among potential first-time buyers.
The UK government, in an effort to support first-time buyers, has introduced a mortgage guarantee scheme. This scheme offers lenders a guarantee on mortgages, compensating them for a portion of net losses in the event of repossession. However, the focus of the government remains on bringing inflation rates down, as rising costs-of-living are causing anxiety among people.
The average rate for a two-year fixed mortgage currently stands at 6.01%, a level not seen since 1 December 2022. Before this date, the two-year fixed mortgage rate had not surpassed 6% since November 2008. The average five-year fixed rate has also increased, reaching 5.67%.
The decrease in the availability of mortgage products is another concern for potential first-time buyers. Before the September mini budget, there were 3,890 mortgage products available. As of now, the number has dropped to 4,683, down from 4,923 on Friday.
The UK Prime Minister, Rishi Sunak, has declined to provide extra support for mortgage holders, stating that his first priority is to halve inflation to keep costs and interest rates down for people. He believes the government's clear plan is the best way to address the issue and has emphasized the importance of delivery and sticking to the plan.
However, Sir Charlie Bean, former Bank of England deputy governor, has warned against government intervention to protect mortgage holders against rising rates, stating it would be 'risky'. He suggests that the focus should be on increasing housing supply and support for first-time buyers, measures that the current government also supports.
The Bank of England interest rates are currently at 4.5%, and they are due to rise again on Thursday for the 14th time. This increase is expected to further impact the mortgage market, adding to the challenges faced by potential first-time buyers.
Photograph courtesy of Scott Graham.
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