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The Markets
by Proactive
Proactive UK has moved.
Coverage of London’s small caps continues on proactiveinvestors.com
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The Markets
by Proactive
Proactive UK has moved.
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The Markets
by Proactive
Proactive UK has moved.
Small-cap coverage continues on .com
Go to Proactive UK

Financial Services

UK lenders return to the market with higher mortgage rates

A typical two-year fixed mortgage deal is currently 5.75%, up from 4.74% on the day of the mini-budget as lenders scramble to reprice deals after the recent financial turmoil

Major mortgage lenders are increasing the cost of home loans, with the average two-year fixed rate now close to 6%, new figures from financial information service Moneyfacts show.

A typical two-year fixed mortgage deal is currently 5.75%, up from 4.74% on the day of the mini-budget, it said, as lenders have scrambled to reprice deals after the pound's fall fuelled forecasts of higher interest rates.

This compared to last December when the average two-year fixed deal was 2.34% before interest rates began to climb.

Amid the turmoil of last week, lenders pulled deals off the shelf at unprecedented levels, with brokers saying deals were lasting for a very short period of time as people flooded them and lenders with enquiries.

Moneyfacts said that there were 3,961 deals available on the morning of the mini-budget, compared with 2,262 at the start of this week - a 43% fall.

Products were last withdrawn quickly at the start of the pandemic, but not at such a level.

The recently re-priced deals have tended to be from major lenders who want relatively low-risk borrowers while homeowners with poor credit ratings likely to find their choice much more limited in the short-term.

Brokers said there is still money available for mortgage providers to lend, but the days of ultra-low rates have quickly disappeared.

Mortgage rates have been rising ever since the Bank of England began a series of seven consecutive rises in the Bank rate - the benchmark figure of interest rates, with rates then jumping after the mini-budget prompted widespread expectation of a faster and higher jump in the Bank rate in the coming months.

Lenders look at the long-term cost of borrowing, and potential demand, and try to stay a step ahead of the Bank of England when setting the rates for fixed rate deals.

Roughly 100,000 people a month come to the end of a fixed deal and often remortgage, while first-time buyers also sign up to fixed deals. The 1.5mln homeowners on variable or tracker deals often see their costs rise in direct response to a Bank rate rise.

The Halifax - the UK's biggest mortgage lender - said it would launch its new, higher rates on Wednesday.

"The new rates reflect the continued increase in mortgage market pricing over recent weeks," a spokesperson for Halifax said.

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