LONDON (CU)_Last week, the United Kingdom registered a bigger-than-expected jump in the official inflation rate to 7 per cent, prompting warnings to households to brace for the sharpest annual rise in the cost of living in 40 years. This puts pressure on the Bank of England to hike interest rates rapidly.
However, the pricing of fixed-mortgage rates over the recent weeks suggests some lenders are expecting a sharp economic slowdown, which would compel the central bank to stop raising interest rates or even cut them in the future. Accordingly, homebuyers and those looking to remortgage are facing a dilemma if they should hunt for a fixed or variable-rate mortgage deal and in the case of the former, if it should be a longer-term fix or not. Regardless, financial experts are advising those looking for a mortgage to act fast, warning that as inflation takes its tall and interest rates continue to rise, the best offers may be drying up.
Given the uncertainty over if and when the Bank of England would hike interest rates and at which pace that would happen, some people hunting for a fixed-rate mortgage are in doubt if they should sign up for a longer-term fix or a shorter-term deal like two years. In the case of the former, they are hoping to be protected from wider economic volatility, while in the latter, they are free to hop on to another loan if rates drop in the future.
However, what’s not in doubt is that mortgage deals are getting pricier, as lenders continue to pull out their mortgage deals or reprice them upwards. Moreover, in view of the ongoing cost of living crisis, many banks and building societies are starting to tighten their affordability tests. This would mean that some borrowers would be unable to borrow as much as they would like. Figures published by financial data provider Moneyfacts shows that the average two-year fixed-rate mortgage on sale rose from 2.65 per cent in March, to 2.86 per cent in April. the average five-year fix, on the other hand, jumped from 2.88 per cent to 3.01 per cent.
Accordingly, the firm noted that there’s enough reason for one to act speedily in obtaining a mortgage if possible. “Those hoping to secure a new mortgage may wish to act sooner rather than later,” Eleanor Williams at Moneyfacts said.
