Mortgage rates creep back up as lenders show caution
Average mortgage rates rose on a monthly basis for the first time since February as lenders approach winter cautiously.
The picture for new and renewing borrowers worsened slightly last month, according to financial information service Moneyfacts, following a series of falls in mortgage interest rates.
The average rate for a two- or five-year fixed interest rate is around 5%; This is much lower than the peak in recent years, but is still quite high for many homeowners.
Analysts suggest the Bank of England is unlikely to cut further base rates any time soon, with uncertainty always a precursor to a Budget.
Moneyfacts data shows mortgage interest rates rose only very slightly over the month, up 0.02 percentage points.
This increased the average two-year mortgage rate to 4.98 percent and the average five-year mortgage rate to 5.02 percent.
More than eight in 10 mortgage customers have fixed-rate deals. The interest rate on this type of mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it.
Hundreds of thousands of potential first-time buyers are also hoping to buy a place of their own with their first mortgage. Everyone will welcome low mortgage rates.
Moneyfacts’ Rachel Springall said the latest situation could “disappoint” borrowers.
“Variable swap rates and caution among lenders have led to an abrupt halt to consecutive monthly average interest rate declines,” he said.
Swap rates reflect the market’s view of which way the Bank of England’s interest rates will go, so lenders use them to set their own rates.
“Lenders have reacted cautiously, with some cap rates being higher and the overall average rising slightly,” said Simon Gammon, managing partner at mortgage advisers Knight Frank Finance.
“This is unlikely to be the start of a sustained rise in borrowing costs, but rather a prolonged pause until the outlook becomes clearer.”
Rates this October are much lower than this month two years ago, when the average rate for a two-year deal was 6.67%.
Some homeowners will have become accustomed to much lower rates in the 2010s and will now be budgeting for larger monthly repayments on top of other financial pressures such as rising food costs.
The government said people’s living expenses would be covered. The budget will be presented by Chancellor Rachel Reeves in November.
Moneyfacts’ Ms Springall said borrowers should consider their own circumstances and seek guidance where necessary.
“It is still important that borrowers get independent advice to navigate the mortgage maze and not feel pressured to get a deal because of the Budget rumour,” he said.
On Monday, the Institute for Fiscal Studies, an independent economic think tank, said the chancellor “directionless repairs and sketchy fixes“While the government is trying to increase the taxes it receives from the budget.
