The average five-year fixed mortgage rate has risen to 6.01% according to Moneyfacts in data released on Tuesday. This marks the highest level since last November as the average two-year fixed deal now stands at 6.47%, up from 6.42% on Monday.
The increase in rates for fixed-rate mortgages has pushed more homeowners to turn to variable rate deals. New data from trade association, UK Finance, has found that 13% of new mortgages taken out in the three months to April were variable rate deals as homeowners are taking a chance that mortgage rates will fall in the long-term.
Chairman of Cornerstone Group International, David Hannah states that it is essential for home buyers to throughly assess the long-term affordability of mortgages.
The rise in rates coincides with nearly 10% of mortgage deals being withdrawn from the market by lenders due to apprehensions about escalating interest rates. Moneyfacts reports that approximately 800 residential and buy-to-let deals have been withdrawn in total.
As a result, homeowners across the UK will be burdened with an additional £9 billion in interest payments between 2023 and 2024, according to the Centre for Economics and Business Research.
Over the course of 2023 and 2024, 2.5 million homeowners will face the expiration of their fixed-rate deals, with an additional one million on variable-rate deals.
Chairman of Cornerstone Group International, David Hannah said, “In the ever-evolving landscape of the UK property market, one of the most prominent obstacles facing homeowners is surging mortgage rates. The data from Moneyfacts showing that 5-year mortgage rates have breached the 6% mark will not be welcome to people searching for a mortgage.
“This has turned more home buyers to variable rate mortgages, as they are taking a chance that mortgage rates will fall in the long-term. It is essential to thoroughly assess the long-term affordability and viability of mortgage options, considering the potential impact on household budgets and future financial plans.”
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