Financial update: Mortgage rates

Philip Hammond’s Budget on Monday included a series of measures to help first-time buyers and boost housebuilding. Whilst these measures are welcome, uncertainty around Brexit means people remain cautious about buying or selling.

When it comes to mortgages, many borrowers have reacted to the political uncertainty by fixing. Around 94% of mortgages issued in August this year were fixed, compared to 59% ten years ago, according to UK Finance data.

The average fixed rate in August was 2.27%, up from 2.09% at the start of the year. This increase is due to the base rate rise to 0.75% in August. But subdued transaction volumes means competition amongst lenders is also on the rise, and is keeping mortgage rates in check. Some lenders are trying to win market share by pricing aggressively. They can no longer be as flexible with lending criteria, so the other tool at their disposal is price.

If you’re looking to apply for a mortgage, you are well placed to take advantage of these circumstances. If you are applying now, you have three to six months to complete on your mortgage application, which means you can agree a rate and hedge against the political uncertainty. In the event of a Brexit deal and a pick-up in property sales, pricing may become less competitive. So now is a good time to review your borrowing options.

If you’d like any help or advice, or want to discuss the financial outlook for the rest of 2018, please get in touch with us.