The recent increase in residential mortgage rates has been a cause for concern for many homeowners. According to Moneyfacts, the average two-year fixed rate mortgage has risen from 1.75% in January 2020 to 2.06% in April 2021. This is the highest rate since August 2019 and represents an increase of 17%. This increase in mortgage rates has been accompanied by a decrease in product availability, with the number of two-year fixed rate mortgages available falling from 1,944 to 1,813 over the same period.
The reasons behind this trend are complex and multifaceted. Firstly, the Bank of England’s decision to raise the base rate in February 2021 has had a direct impact on mortgage rates. This was followed by lenders increasing their own margins, as they sought to protect their profits in the face of rising costs. In addition, the coronavirus pandemic has caused lenders to reduce their risk appetite, leading to fewer products being available on the market.
The impact of these changes is far-reaching. For existing homeowners, the rise in mortgage rates means that their monthly payments will increase, potentially making it harder for them to manage their finances. For those looking to buy a property, the decrease in product availability means that they may struggle to find a suitable mortgage deal. This could lead to some potential buyers being unable to purchase a home, or having to accept a less favourable deal than they would have done before the changes.
It is clear that the recent changes in mortgage rates and product availability have had a significant impact on the housing market. However, it is important to remember that these changes are not permanent and that the market will eventually adjust to the new landscape. In the meantime, it is essential that homeowners and potential buyers take the time to compare different deals and ensure that they are getting the best deal possible.