Mortgage rates have hit the highest level in 15 years
Just when we all thought the ‘stay at home’ message was a thing of the past, new research from Moneyfacts has found people are now trapped in their houses as mortgage rates have reached new highs.
Today, Moneyfacts, an organisation that provides product data for the UK retail financial industry, revealed that mortgage rates have once again spiked due to the aftermath of the mini-budget, which was delivered by Kwasi Kwarteng – former Chancellor of the Exchequer – last September.
The average rate, which has been climbing steadily for weeks, has now reached 6.66% – a level not seen since August 2008, which is when the UK experienced the great recession.
Additionally, the figure has surpassed the peak seen in October 2022 when mortgage lenders withdrew from the market as they didn’t trust the financial plans that had been highlighted by former Prime Minister, Liz Truss, and her cabinet.
Following the failure of the mini-budget, the Bank of England have had to increasingly hike up interest rates -the most recent increase was the 13th. In a row – in an attempt to steer the UK from entering another recession. However, as interest rates have risen significantly, UK banks such as Lloyds, Santander and Nationwide have had to continuously up mortgage rates.
After the news broke this morning, Bank and building society bosses have been involved in a hearing with the treasury committee since 10:15 BST. Bosses informed authorities that while they were yet to see any material increase in the number of customers in arrears, those taking out a new loan deal were facing higher payments above £200 per month.
Bank representatives were also asked by MPs to explain the support they will be offering to customers during this difficult financial time.
Andrew Assam, homes director for Lloyds, said the industry’s new mortgage charter, agreed with the chancellor, brough ‘clarity’ and ‘consistency’ for consumers.
The deal means struggling borrows can switch to interest-only payments for six months and extend their mortgage term to reduce monthly payments. Similarly, in a bid to offer some reassurance, mortgage lenders are also prevented from evicting people from their homes less than a year from their first missed payment.
Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority, is urging homeowners who are struggling with their mortgage, or believe they might have difficulties, to speak to their lender.
Mr Mills said: ‘If you can keep up with your mortgage payments, you should, as changing your contract could lead to higher payments down the line.
‘But if you are worried about making your payments, contact your lender as soon as possible as they have a range of options to help.
‘Regulation cannot stop rates from rising, but the wider measures we’ve put in place over the past decade will make sure people get the support they need, when they need it.’
Image: Elisa Ventur