Time running out for buyers as cheap mortgage deals disappear ahead of possible rate hike – The Mirror

by MoneySaverExpert

A flurry of cheap mortgage deals have vanished ahead of a possible Bank of England rate hike on Thursday.

Expectations are growing that the central bank will up borrowing costs from a record low to keep a lid on inflation.

Some mortgage lenders have already pre-empted any move by pulling their best deals.

On Monday last week there were 82 fixed rate mortgage on offer with interest rates of between just 0.84% and 0.99%.

By Tuesday of this week the figure had slumped to just 22, according to analysis by data firm Defaqto.

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It also showed how last week the average two-year fixed mortgage rate for a first-time buyer putting down a 5% deposit was 2.45%.

Over the past week the figure has risen to 2.69% – adding around £216 a year to the cost of a typical £150,000 25-year mortgage.

Around three quarters of mortgage borrowers are on fixed-rate deals and so would be protected from the immediate impact of any base rate increases.

Katie Brain, consumer banking expert at Defaqto, said: “We have enjoyed record low interest rates for a long time and they had to start going back up at some point.

“For anyone who needs a mortgage, there is never a good time for this.”

The Bank of England has come under mounting pressure to cool inflation, amid a wider cost of living crisis.

Inflation currently stands a 3.1% but is expected to rise over the coming months.

The Office for Budget Responsibility (OBR) last week warned it could jump to a 30-year high.

Some economics are predicting the Bank of England will vote to increase its base rate – which influences borrowing costs for households and businesses – by 0.15 percentage points to 0.25% on Thursday.

Any increase will mean higher interest payments for the Government because of the £2.2trillion mountain of debt it has built up.

Chancellor Rishi Sunak said even a one percentage point increase in interest rates would cost the country £23billion in payments.

Any rate rise could bring some much-needed relief for long-suffering savers.

However, experts warn banks will be in no hurry to pass it on.

Sarah Pennells, consumer finance specialist at Royal London, said: “There’s no guarantee that the interest rate on variable rate savings accounts will rise straight away.”

Helen Morrissey, senior pension and retirement analyst at broker Hargreaves Lansdown, said an interest rate rise could be good for buying an annuity to give them an income in retirement.

She said: “After years in the doldrums, annuity rates have been on the rise throughout 2021, and recently hit a two-year high.

“If the Bank of England chooses to raise interest rates this could give annuities a much-needed further boost towards the end of the year.”

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