They say what goes up must come down. When it comes to mortgage rates, it tends to be a case of when things are going down, how long will it be until they come up again.
Every type of market has some fluctuations, and the mortgage market is no different. We wrote in September about how mortgage rates were falling, and that they had done so for three months in succession.
This month however, there are signs that rates are stabilising, with a small rise recorded. In our latest blog, we take a look at what’s going on.
Why were mortgage rates falling?
The last few months have seen a period of competition and rearrangement within the mortgage industry.
There has been a strong rate competition among lenders. These lenders are still looking to make progressive steps after a turbulent time during the COVID-19 pandemic.
Part of this recovery period led to very low initial rates for certain borrowers from lenders. These were particularly aimed at borrowers with high financial security. This kind of client is deemed to be lower risk than, say, somebody trying to get onto the property ladder for the first time.
What has changed?
According to MoneyFacts, the past month has seen some repricing and range amendments taking place.
This has mainly taken place on mortgage deals with lower loan-to-value (LTV), and the majority have been for deals with 75% LTV or lower.
This has contributed to the overall average two and five-year fixed rates rising by 0.04% month-on-month. Average two-year mortgage rates have risen to 2.29%, while average five-year mortgage rates have risen to 2.59%.
What does this mean for me?
It depends on your financial position. If you had been eyeing up a mortgage with a LTV value of 75% or lower, then the news that rates are increasing for this type of mortgage isn’t ideal.
There has however been a period of significant lowering of these rates in recent months, so there is still an opportunity to find a fantastic deal of this kind.
If you are seeking a 90% or 95% LTV loan, then the increase in mortgage rate is not as steep. In fact, there has been a solid rise in the number of mortgage products available on the market. The biggest increase in these has been for 90% and 95% LTV mortgages.
It is important to remember that although average mortgage rates have increased slightly in the last month, they are still down on where they were this time last year. This all means that getting a mortgage at present means you could well secure a good deal.
What the rise does point to is the potential for rising mortgage rates over the coming months. Obviously, time will tell on whether or not this comes to pass.
So what does this mean for you? It all depends on what you are looking for, and the position you are in at present.
Contractors and freelancers who have come through the pandemic in a good financial position may want to move quickly to secure a mortgage with a lower LTV percentage sooner rather than later. For those out there with a lower deposit, then there is less urgency.
Roots Mortgages provides free mortgage advice, so if be sure to take up our offer if you feel you need some guidance around securing the ideal mortgage deal for you.
