Category: Mortgage

The Bank of England says one in four mortgages will end when the mortgage borrower is in retirement, as more people extend mortgage terms to make repayments more affordable.

The Bank says over half (51%) of mortgage borrowers now opt for a 30-year mortgage or longer, while between 2021 and 2023, the average mortgage term length for a first-time buyer increased by a year, from 28 years to 29.

Remortgaging has seen the biggest increase in average term length: in 2021 the average mortgage term for remortgaging was 21 years, whereas by 2023, the average mortgage term for remortgaging increased to 23 years, an increase of two years.

The average property now costs seven times the average person’s salary. This is significantly higher than the four-to-five times salary cap that many mortgage lenders use as a guideline.

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Since mortgage rates began rising, many of the nine million mortgaged households in the UK and close to two million landlords have been faced with the prospect of much higher payments.

Many had become accustomed to ultra-low interest rates for more than a decade.

In this six-part series, we look at how much more people are really paying when they take out a new mortgage, how households are coping and if a mortgage crisis is afoot.

Here we look at whether a mortgage crisis could still unfold over the coming months and years. 

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Are you torn between taking out a two-year fixed rate mortgage or a five year fix? If so, you have come to the right place.

This is a question which many-a would-be buyer and remortgaging homeowner is pondering at the moment and it’s no wonder.

As you will no doubt be aware – it’s a bit of a conundrum.

Here’s the problem. A two-year fix is more expensive – new data out just this week from Moneyfacts shows the average two-year fixed rate is 5.91% whilst the five-year version is 5.48%. The cost difference in repayments for the two can amount to hundreds of pounds.

But whilst you will pay more to fix for two years, with predictions interest rates might fall later this year, would the cheaper five-year option confine you for the long haul, and prevent you benefiting from even lower rates in the future?

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NatWest is increasing the cost of selected two and five-year fixed-rate residential mortgages by 0.05 percentage points. The increase will be applied on deals for home purchase, including first-time buyer rates, and for remortgage, effective tomorrow (Wednesday).

The move comes despite falls in wholesale interbank borrowing rates, which suggests NatWest is attempting to control demand for its products so as to be able to maintain service standards, and not responding to fears that borrowing costs generally are set to remain high.

There is a growing expectation that the Bank of England will trim the Bank Rate from 5.25% at some point over the summer.

NatWest already increased rates for new borrowers in April and hiked the cost of product transfer deals (available to existing customers coming to the end of a deal and looking for a new rate) on 8 May.

Its two-year fixed rate for home purchase will now increase from 4.77% to 4.82% (60% LTV) with a £1,495 fee. The five-year equivalent rises from 4.4% to 4.45%.

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There has been a growth of older first-time buyers, increases in average loan sizes, and longer mortgage terms being searched for, the latest data from Legal & General Mortgage Services reveals. 

It found there was a 13% increase in 56 to 65-year-olds searching for their first property in Q1 2024 compared to the same period last year suggesting that a growing number of buyers are having to wait until their late 50s and beyond to take their first step onto the housing ladder.  

Legal & General’s data platform Ignite found in the 12 months to April 2024, 38% of potential buyers in the UK were first-time buyers (FTBs), with an average age of 33. 

When comparing Q1 2024 and Q4 2023, there was a 37% increase in 18 to 30-year-old FTBs searching for a property, and a 33% increase in 31 to 40-year-old FTBs.

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The Bank of England has held the base rate at 5.25% for the sixth time in a row. But there are now stronger signs that a rate cut might be coming soon – which could have a knock on impact on mortgage and savings rates. Here’s what you need to know.

The base rate is used by the central bank to charge other banks and lenders when they borrow money – and so it influences what borrowers pay and what savers earn. It’s also used by the Bank as a tool to control inflation (the rate at which prices rise).

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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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