Category: Mortgage

For a long time the traditional length of a UK mortgage has been 25 years, but runaway house prices and, more recently, dramatically higher borrowing costs are prompting more and more people to “go long” on their home loans.

On Monday, the former pensions minister Steve Webb revealed that younger homebuyers were increasingly being forced to gamble with their retirement prospects by taking on ultra-long mortgages lasting beyond the end of their working life.

The ex-Liberal Democrat MP published data obtained via a freedom of information request indicating that in the past three years, more than 1m mortgages that stretch beyond the current state pension age have been taken out.

Webb tabled the request in response to a recent report from the Bank of England’s financial policy committee (FPC) that revealed that almost half of all new mortgages issued in the final three months of 2023 were for terms of 30 years or more.

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t might look like house prices have stabilised, staying relatively flat over the first four months of 2024, but at least one mortgage expert says there’s now a  north/south divide thanks to the costs of borrowing.

Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “This is a function of the fact that mortgage rates remain so stubbornly high. Banks are pricing in the fact that the Bank of England’s cuts are expected later than they had hoped for earlier in 2024. At the end of April, the average two-year fixed rate mortgage had crept up to 5.87% – from 5.8% at the end of March.

“It’s not a dramatic move, but it’s in the wrong direction, and it’s coming at a time when homeowners expected mortgage rates to be dropping.

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The number of mortgage approvals made to home buyers jumped in March to the highest level since September 2022, according to Bank of England figures.

In an indication of property sales to come, mortgage approvals for house purchases rose from 60,500 in February to 61,300 in March.

It was the highest total since more than 65,300 mortgages for house purchase got the green light in September 2022.

Approvals for remortgaging decreased from 37,700 to 34,200 over the same period, according to the Bank of England’s Money and Credit report.

The report was released as HM Revenue & Customs (HMRC) figures showed that home sales across the UK increased for the third month in a row in March.

Some 84,200 home sales took place in March, which was 6% lower than March 2023 but 1% higher than February 2024.

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Large numbers of mortgage borrowers are continuing to opt for two-year fixed deals in the hope that interest rates will be lower when they next come to remortgage.

Some 42 per cent of all mortgages were fixed for two years in January and February, according to the latest figures from UK Finance.

But hopes of base rate cuts, which feed in to prices on fixed rate mortgages, have been dampened in recent weeks. 

While markets had previously been betting on there being six or seven base rate cuts this year, it is now only forecasting two or three.

This calls into question whether opting for a more expensive two-year fix over a cheaper five-year one still the best choice for home buyers and those remortgaging. 

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Britain’s biggest mortgage lender today said flats are back in fashion as first time buyers target smaller properties due to high mortgage costs.

Halifax said prices of flats are now rising faster than houses four years after the pandemic triggered a “race for space” that boosted demand for homes with gardens and left small flats without outdoor space almost unsellable. 

The lender today revealed that the property market trod water during April with the average price rising 0.1% in the month to £288,949, while the annual rate of growth was 1.1%. 

In London prices rose 0.1% year on year to an average £539,336.

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Self-employed mortgage borrowers face an even tougher set of challenges in a cost-of-living crisis and high interest rate environment than their PAYE counterparts when it comes to getting a mortgage.

But self-employed mortgage product choice and lender support are strong, say brokers, putting today’s market back on a par with pre-pandemic conditions.

Homeowners who work for themselves not only have their own rising bills and interest rates to manage, but some must deal with their customers cutting back on how much they spend as budgets get tighter.

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Homeowners have been dealt a fresh blow after experts warned key mortgage rates could surge above 6 per cent again as early as next week.

More than 20 lenders have hiked their mortgage rates this week, pulling some of the most competitive home loans from the market, including several deals below 5 per cent.

The cost of borrowing has been surging since Bank of England officials signalled last week that a long-awaited cut in rates would be delayed further. 

Santander yesterday increased its mortgage rates by up to 0.26 percentage points for the second time in four days.

The move follows increases at NatWest, Halifax and Nationwide, which also pushed up the prices of their fixed-rate purchase and remortgage deals by up to 0.25 percentage points.

Now, the average two-year fixed-rate deal could breach the 6 per cent mark in the coming days – for the first time since December. 

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Halifax said the average UK house price, external had risen by 0.1% in April, with a typical home now valued at £288,949.

Prices last month were up 1.1% from the same point last year, following a 0.4% annual rise seen in March.

Amanda Bryden, head of mortgages at Halifax, said the housing market was “finding its feet in an era of higher interest rates”.

“While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability,” she added, with activity and demand improving.

“However, we can’t overlook the fact that affordability constraints are still a significant challenge, for both new buyers and those rolling off fixed-term deals,” Ms Brydon said.

“Mortgage rates have edged up again in recent weeks, primarily as a result of expectations around future Bank of England base rate changes, with markets now pricing in a slower pace of cuts.”

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Nearly 900,000 households are expected to see their mortgage repayments rise by £240 on average ahead of the next General Election, according to new analysis.

Data from the Financial Conduct Authority (FCA) suggests that 4,200 mortgage holders will pay more between now and the expected election in November.

Research conducted by the House of Commons Library, commissioned by the Liberal Democrats, found that “Blue Wall” voters in Southern England are more likely to be hit hardest.

According to this analysis, the regions where mortgage deals are most likely to expire in the next six months include Greater London, the North West and the South West.

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The Bank of England base rate has been paused once again at 5.25%.

This marks the sixth time in a row where its Monetary Policy Committee (MPC) has decided not to increase borrowing costs – however, the base rate still remains at its highest level in 16 years. Economists had widely expected the base rate wouldn’t be cut just yet.

The base rate is what the Bank of England charges other banks and lenders to borrow money, with this then having a direct impact on how much you’re charged as a customer. Millions of homeowners have been hit with higher mortgage costs due to how much the base rate has increased since December 2021, when it stood at just 0.1%.

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