Mortgage rates set to rise (again) following Budget although fixed rates still starting from 3.85%
Banks and building societies are set to increase their most competitively priced mortgage rates again following Chancellor Rachel Reeves' first Budget.
Some mortgage lenders reversed previous price hikes in the run-up to the Budget, but they are set to rise again following mortgage funding cost increases. Coventry Building Society, Precise, TSB and some specialist buy-to-let lenders were the first to raise prices.
Gilt* and swap rates** have recently increased and some lenders have already said this will have a knock-on effect on mortgage rates. One buy-to-let lender announced earlier that it is pulling some of its rates due to volatility in the pricing markets. There have been some product withdrawals and rate increases.
How much are mortgage rates now?
Two-year fixes start from just below 4%, while five-year fixes are available from 3.85%. These are typically offered through larger lenders like Barclays, Halifax, NatWest, and HSBC for Intermediaries.
Applicants will need a larger deposit to qualify, and arrangement fees are typically around £999. However, it would not be a shock if most of the remaining sub-4% rates were withdrawn soon until the money markets calm down and the base rate is lowered.
Aaron Strutt, product director at Trinity Financial, says: "If you are applying for a mortgage, it makes sense to secure a rate now. You can monitor the market and try to swap to cheaper deals if they are available before you complete your purchase or remortgage.
"In a regular market, mortgage rates go up and down—this is going to happen more frequently than many particularly younger borrowers have been used to.
"Market focus is now very much on next week’s US election, which remains too close to call and will be pivotal to the dollar. A Trump win likely leads to a stronger currency. The Bank of England and US Federal Reserve also meet next week, with a 0.25% rate cut expected from each."
The Bank of Canada lowered its key interest rate to 3.75% two weeks ago — cutting it by half a percentage point.
Stamp duty changes
According to the Nationwide Building Society, home sales are expected to "jump" at the beginning of next year as people try to buy before stamp duty rises. From March 2025, changes introduced in Wednesday's Budget mean many will pay the tax when they would not have previously.
Meanwhile, the Budget announced changes to stamp duty for buy-to-let landlords and second-home buyers, which came into effect on Thursday, November 30th. The additional tax they face rose from 3% to 5%.
*A gilt is a UK Government liability denominated in sterling, issued by HM Treasury and listed on the London Stock Exchange. **Swap rates, also known as interest rate swaps, allow two parties to exchange interest rate cash flows over a specified period. In the context of mortgages, banks and lenders use interest rate swaps to manage their own exposure to interest rate fluctuations.
Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
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