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Will mortgage rates go up in 2022 UK?

The last few weeks have been chaotic in terms of the UK economy and the housing market.

With inflation at 9.9% and interest rates at 2.25% and expected to continue rising, prospective property buyers across the country will feel the effects.

Average mortgage rates have already risen considerably, with buyers now facing much higher prices than they would have even a few weeks ago. Many will now be wondering how much higher these rates can climb.

On this page, we will discuss the current mortgage rates, the predicted housing market crash, and ways in which you can still save on your mortgage.

Current mortgage rates UK

As of this moment, mortgage rates in the UK have increased significantly. This is due to the Bank of England increasing their base rates in line with spiralling inflation. 

With the price of basics such as energy, fuel and even food going up, the Bank of England have consistently raised interest rates to try and stabilise the economy. These rate rises will have a huge impact on anyone with a current variable rate mortgage deal.

Anyone with a tracker rate mortgage will be directly affected, as the interest element of their repayments will always be the same as the Bank of England’s base rate.

Those on a standard variable rate (SVR) mortgage or discount mortgage will likely also face higher costs if their lender chooses to raise their base interest rate in response to the Bank of England’s change in rates. Lenders can change rates at their own discretion and with the current financial situation a decision to increase rates seems a likely outcome.

UK housing market crash

The UK economy has consistently shrunk in the last economic two quarters, meaning the country is officially in a recession. This has plunged the country even deeper into the already significant cost of living crisis.

All this pressure on the economy is predicted to cause an imminent housing market crash. It is speculated sellers will now drop the prices of their properties by up to 20%*, in an attempt to sell before mortgages become more expensive or difficult to access for their potential buyers.

In some ways this is great news for buyers, with the possibility to find an ideal property being sold at a fraction of its previous price. It is however worth remembering these lower prices are a direct result of increasing mortgage costs.

With the rate of interest charged for mortgages having already increased, with further price rises expected, it is a good idea to take advantage of any lower priced properties as soon as possible.

Although lower property costs will likely continue for a while, there is the chance mortgage rates will get even more expensive. This means the sooner you put a deal in place the better, and a fixed rate will be ideal under these circumstances.

A fixed mortgage rate means you will pay a set price for your monthly mortgage repayments until the fixed term ends. This could equal 2, 5 or even 10 years worth of additional financial security, while other borrowers may face spiralling costs.

For more information about fixed rate mortgages CLICK HERE.

Can I get a mortgage?

Even with the financial crisis in the UK, those wishing to buy a property should still be able to find great mortgage deals. Many lenders have now pulled some of their deals from market but there should still be a range of reasonably priced options to choose from. Comparing which prices and deals are still available across lenders will allow you to choose the most suitable and affordable mortgage for what you need.

It will be worth assessing your finances and budget to ensure you will be able to afford the repayments every month. With increasing interest rates, it is best to be certain you can afford this expense long term to avoid defaulting on your loan.

If looking to take out a new mortgage or remortgage, it could be best to avoid a variable rate for the time being. Although there are many advantages to variable rates, a fixed rate will help you to avoid increasing costs long term.

How soon can you remortgage before fixed rate ends?

If you have an existing fixed rate mortgage deal in place, you should for now be safe from rising prices due to interest rate increases. This is especially good news if you put this mortgage in place more recently, with several years of fixed pricing still ahead of you.

If you are nearing the end of your fixed rate term, you will now be facing the possibility of switching over to your lender’s standard variable rate (SVR) – and the likely higher costs that come with this.

A remortgage to a new fixed rate deal will be your best option in this case. Borrowers will often believe once in a mortgage they are stuck with these terms until the mortgage ends.

You can remortgage your property at any time, but with a fixed term mortgage lenders will usually expect you to wait until at least 6 months into your mortgage before doing so.

 It is best to also bear in mind that you may be tied into fees such as early repayment charges (ERC) for remortgaging before the end of your mortgage term.

Check with your mortgage provider to see if this is the case. Even if ERCs are in place, you still may be able to save far more long term by paying these now and switching to a new deal.

For more information about how to remortgage your property, speak to one of our EXPERTS or CLICK HERE.

*according to The Guardian

Useful resources

Bank of England – Official Bank Rate history

Bank of England – Bank Rate increased to 2.25% – September 2022

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