Interest rates on mortgages have surpassed the 6% threshold for the first time since a six-month period.
The mortgage market in the UK is currently experiencing a significant shift, with interest rates on the rise and a decrease in the number of available mortgage products.
The Bank of England's interest rates are at 4.5%, set to increase again on Thursday for the 14th time. This surge follows a period where the rate had not surpassed 6% since November 2008. The current average rate for a two-year fixed mortgage stands at 6.01%, and the average five-year fixed rate has climbed to 5.67%.
Amidst these increases, mortgage lenders have been rapidly adjusting their rates and pulling deals. Last week, the UK's leading bank, Santander, withdrew mortgage deals for new borrowers. The number of mortgage products available has decreased, with 4,683 mortgages on the market, down from 4,923 on Friday.
Despite these challenges, the government has maintained its focus on bringing inflation rates down, as stated by Prime Minister Rishi Sunak. Mr. Sunak claims that the government's clear plan to do this is delivery, and they need to stick to it. He also stated that the first priority is to halve inflation to keep costs and interest rates down for people.
In an effort to support first-time buyers, the government offers a mortgage guarantee scheme. This support measure compensates lenders for a portion of net losses in the event of repossession, aiming to incentivise lenders to offer more mortgages to first-time buyers.
However, there are concerns about government intervention to protect mortgage holders from rising rates. Sir Charlie Bean, former Bank of England deputy governor, has warned against such intervention, stating it would be 'risky'. He believes that the market should be allowed to adjust naturally to economic conditions.
In light of these developments, it is crucial for both borrowers and lenders to stay informed and make informed decisions about their mortgage options. The mortgage guarantee scheme for first-time buyers may offer some relief, but it is essential to consider all factors carefully before making a decision.
