Category: Mortgage

An analysis of government house price data by business consultancy Hargreaves Lansdown suggests the typical mortgage term for a first time buyer has now stretched to 32 years.

This revelation emerges from Office for National Statistics data which says that in England in 2023, the average house price was £290,000 and the average annual income was £35,100 – so houses cost 8.3 times income. This is actually down very slightly since 2022, when it was 8.5 times.

The ONS affordability threshold is five times earnings – and in England and Wales we have been above this since 2002. The least affordable area is Kensington and Chelsea, where property costs 34.2 times earnings.

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ome of the UK’s biggest banks are raising mortgage rates as expectations of when the Bank of England will cut interest rates are pushed back.

Barclays, HSBC and NatWest are all increasing some costs on fixed-rate mortgage deals from Tuesday.

Mortgage rates have risen over the past few weeks as views have changed on when the Bank might cut borrowing costs.

The Bank is now not expected to cut its benchmark rate as early or as often as previously thought.

The announcement from Barclays, which is lifting rates for the second time in the space of seven days, will see a 0.1% increase across a range of its mortgage products.

NatWest said it would raise some of its two and five-year “switcher” deals for existing customers by 0.1%.

HSBC added it was increasing some of its rates on Tuesday, but did not give details of the increases.

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Liz Truss has refused to apologise for the surge in mortgage rates in recent years, caused as part of the banking crisis, fuelled largely by her disastrous mini-budget in October 2022.

Britain’s shortest-serving prime minister says she was ‘completely blindsided’ by the adverse impact the fiscal announcement would have on the mortgage market and wider UK economy.

In an interview with Sky News On Sunday yesterday, Truss who ousted from power by her own MPs after less than six weeks, said that “mortgage rates have gone up across the world”, and that she was therefore not responsible for what has happened here in the UK.

She said: “The issues that I faced in office were issues of not being able to deliver the agenda I’d set out because of a deep resistance within the British economic establishment.

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Fixed mortgage rates have edged up since February, after almost six months of consecutive rate cuts by lenders.

Since the start of February the average two-year fixed rate mortgage has risen from 5.56 per cent to 5.81 per cent, according to Moneyfacts. 

Meanwhile, the average five-year fix has risen from 5.18 per cent to 5.38 per cent.

The lowest five-year fixed rates on the market are currently all above 4 per cent while the lowest two-year fixes are all above 4.5 per cent.

This will come as a hit to the 1.6 million households remortgaging this year,  many of which will be coming off rates of 2 per cent or less.

This pain is expected to continue over the coming years as more people come to the end of their cheaper fixed rate deals. 

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When Richard Wise* moved from London to Margate in Kent three years ago, he did not expect to move again any time soon. But the music industry manager and his partner are planning to downsize from a four- to a three-bedroom property after their mortgage rate quadrupled.

“After Liz Truss’s bombshell [the September 2022 mini-budget that led to rising mortgage rates], our mortgage repayments doubled last year,” the 40-year-old says.

Although the couple had access to an inheritance, which they used to pay off some of the mortgage, their increased monthly outlay – the rate jumped from 1.09% to 4.9% – put a strain on their bank balance.

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The mortgage price war appears to have slowed so borrowers need to act fast to find the best deal if they want to remortgage or get a home loan to buy a property.

Mortgage lenders started cutting rates at the tail-end of 2023 amid hopes that the Bank of England would cut the base rate early in the New Year amid slowing inflation.

But financial markets are now expecting an interest rate cut towards the middle rather than start of this year and economic uncertainty has pushed up swap rates, prompting lenders to starting increasing their pricing again.

Even the best deals aren’t sticking around for long as borrowers rush to snap up lower rates.

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UK households have been told they can cut their mortgage bill to just £330 a month – if they act decisively and DOWNSIZE. Mortgage holders can get their monthly payments cut from over £700 to £300 by picking the right property.

Speaking to the Guardian newspaper, a string of couples who have made the bold move have spoken out over the savings they have been making. Richard Wise moved from London to Margate, and slashed his costs, while a 50-year-old in Edinburgh cut her fixed-rate deal on a five-year mortgage to £330 a month – down from a variable tracker which was costing £750.

“It’s more a fear of what could happen,” she said. “I was a teenager when mortgage rates went crazy … and so I’m worried about those kind of scary figures and [rates] going out of control with the current government. With everything increasing, it feels like one piece of the puzzle we can have control of.”

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Other lenders also offer low deposit deals aimed at young buyers – and experts caution those with a high loan-to-value ratio should try to overpay to reduce the risk of getting into negative equity.

First-time buyers are being offered the chance to pay a modest £5,000 deposit and potentially borrow up to 99% of a property’s value.

The mortgage from Yorkshire Building Society is valid on places up to £500,000 and comes without a fee – but there are a few key exceptions.

It’s not available for flats or new-build properties and would-be borrowers must pass strict affordability and credit scoring checks.

The task of saving for a deposit is one of the barriers that many first-time buyers struggle with as most lenders like a minimum 10% up front.

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When people buy a home they tend to think they are making a sound investment, as prices tend to rise in the long run.

But unless they are a cash buyer, they require a mortgage from a lender in order to purchase a property.

They will then spend decades repaying that mortgage, with a large portion of their monthly payments going on interest.

While it’s easy to know how much they’ve made from house price growth when they come to sell, homeowners usually pay less attention to how much the mortgage has cost them in the meantime.

With mortgage rates having risen over the past two years, it means the total amount paid back is more likely to have superseded any gains made by house price growth during that time.  

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Mortgage rates have fallen below 6% on average, but borrowers must still grapple with higher costs to get on or move up the property ladder. 

Last year, customers saw mortgage pricing hiked by consecutive increases to the base rate, as the Bank of England (BoE) attempted to tackle chronically high inflation levels.

But recently, there has been a “plateau” in interest rates, said Forbes Advisor, made possible in part by “continued cooling inflation”. The latest figures show inflation dropped from 4% in January to 3.4% in February. In addition, at the end of March, the Bank of England once again kept interest rates unchanged “as was widely expected”, the website added. 

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