The pandemic has had many negative effects on all aspects of life, and it is now also forcing up the largest financial outlay for many households in the UK.
According to Moneyfacts, a price comparison site for financial products, the average rate on 2-year fixed mortgages increased by nearly half a percent. In July this year the average 2-year fixed rate was 1.99%, and this month it increased to 2.43%, a hike of 0.44%.
To illustrate the impact of this on the average outstanding mortgage, this means an increase in payments of £600 per year on a mortgage of £138,000, a rise that many households will find it very difficult to cope with.
Not only are mortgages getting more expensive, they are also harder to obtain if you’ve got a deposit of less than 15%. This puts a lot of first-time buyers and home movers with little equity in their current homes, in a difficult position - especially with the clock ticking on temporary tax-savings when buying a property. The stamp duty holiday expires at the end of March 2021, with no sign of any extension from the Chancellor.
The increase in the mortgage rates affects all types of situations, whether you’re buying for the first the first time, moving home and selling, or staying put and trying to get the best rate on your mortgage.
There are multiple reasons for the increases in the rates, and the announcement of a vaccine will not cure this particular problem quickly. Lenders are currently working with very limited staff capacity due to lock-downs and furloughed staff. This is at a time when they are already facing huge demand from potential borrowers who are buying to take advantage of the stamp duty holiday.
However, the biggest issue for borrowers right now is the paranoia of lending institutions about how quickly the economy will recover from Covid-19, and the impact on peoples’ jobs and their ability to make their mortgage payments. This has meant stricter underwriting, which compounds the problem of getting a mortgage quickly.
In this backdrop, it is more important than ever that impartial mortgage advice is sought as early as possible when planning a property purchase or remortgage. Online mortgage calculators and price comparison websites can give an indication of potential borrowing and the best rates available, but the process of qualifying for a mortgage can be long-winded and complicated.
Smartr Finance have access to over 20,000 mortgages from 120 lenders, and can find the best mortgage rates for your circumstances quickly and efficiently, no matter where you are in the UK. Fill in the simple contact form via the 'free quote' button and an experienced adviser will call to discuss your requirements.