Natwest, Barclays, and Virgin Money have all recently increased the interest rates on their fixed mortgages, joining a string of lenders reacting to the current market volatility. Natwest specifically announced that it would raise rates by up to 0.35% on selected two and five-year fixed deals for both new and existing customers. Virgin Money also increased rates by 0.1% on some two-year fixed deals. Barclays has not provided details on its rate changes. These increases come in the wake of higher-than-expected inflation figures in May, which spooked the market. Lenders have been adjusting rates in response to the Bank of England’s decision to raise the base rate to a 15-year high of 5%. Market expectations suggest that the base rate may climb as high as 6% in the next year. This anticipation has led to further rate increases as lenders closely monitor swap rate movements. The two-year swap rate, which indicates future interest rates, has risen by 0.65% in the past month and 1.38% in the past six months. The recent rate hikes are a symptom of the fluctuating mortgage market, which has seen TSB discontinuing mortgage products with little notice. Average rates for two-year fixed mortgages with a 40% deposit and a 10% deposit have both risen since June 1st. The continuing hike in mortgage rates is likely to persist until inflation data improves. Mortgage holders may face significant financial pressure, particularly as many are due to come off sub-1% deals and face rates as high as 6%. Experts predict that interest rates will continue to rise until the Bank of England’s rate-setting committee reconvenes in August, though it might settle if inflation data improves. However, reports suggest that the trend may continue throughout 2024. Analysts remain uncertain about the future of mortgage rates as inflation remains high. Though the number of loans approved for house purchases and remortgaging increased slightly in May, the figures do not account for the recent interest rate hike. Borrowers in need of a mortgage should explore their options as soon as possible and consider seeking the assistance of a mortgage broker to secure the most favorable rates. By doing so, borrowers can secure a rate without paying expensive arrangement fees. As for home buyers, it is crucial to secure rates promptly to determine monthly payment amounts. Additionally, it is important for home buyers to be mindful of their borrowing limits and prepare for the possibility of falling house prices due to higher mortgage rates. To compare mortgage costs effectively and find the most suitable deal, consult with a reputable broker. It is also advisable to monitor rates closely and seek brokers’ assistance promptly to secure the best mortgage terms.
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