Mortgage market mayhem: what it means for you

Mortgage market mayhem: what it means for you
It’s been a tumultuous few weeks for the mortgage market, with lenders pulling products especially fixed rates before usually replacing them with higher rate deals. There’s even been instances of others temporarily removing some mortgages altogether.

Given constantly changing rates and deals, it can be hard for homebuyers and those looking to remortgage to know which way to turn. Often, you might find a deal you like, only for it to disappear the next day.

Here, we explain why the mortgage market is currently in such a state of flux and explore some of the different options available to borrowers.

Why are so many lenders changing rates?

Inflation numbers in the 12 months to April were higher than expected, which means we’re likely to see further interest rate increases in coming months to try and bring it down more quickly. Consumer Price Index (CPI) inflation stood at 8.7% in April, more than four times the government’s 2% target.

Lenders started repricing deals as soon as the latest inflation figures were announced, as market rates leapt in anticipation of further interest rate increases. Average rates are now much higher than in previous weeks as a result, with 2-year fixes now topping 6%.

What can borrowers do?

If you’re due to remortgage imminently, it’s vital to try and avoid rolling onto your lender’s standard variable rate, as this will usually be much more expensive than other mortgage deals.

If you’re concerned about rates rising further, you may want the peace of mind that a fixed rate mortgage can provide, but you’ll need to think carefully about whether you want to lock into a short or longer-term fixed deal. Five year fixed rates have also gone up although remain lower than 2 year deals as there is still an expectation of rates falling back over time, even if it may take longer.

You don’t have to wait for your existing mortgage deal to end before you start your search for your next deal, as most lenders will allow you to secure a deal up to six months before you want it to begin. This has the benefit that you can lock in at today’s rates, but you can review your mortgage choice nearer the time to see if a better rate has become available. L&C can do this on your behalf as part of our rate check service.

Whether you’re buying or remortgaging, it’s well worth speaking to a mortgage broker who can talk you through the options and find the best course for you based on your individual circumstances.

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