As feared, lenders have continued to show their risk in lending by hiking mortgage rates. According to Moneyfacts, the average two-year fixed mortgage rate is now the highest it has been since 2008 at 6.66%. It is an increase from the average of 6.63 reported on Monday. This is difficult news for homeowners coming to the end of their mortgage terms soon or those that have already and did not remortgage when they could have done so.

When a homeowner’s mortgage term expires, they have the choice to remortgage or allow their lender to move them to their standard variable rate (SVR). Skipping on a remortgage could be a very risky choice. A SVR is likely to be a higher rate than what could be found with a remortgage, and when rates increase the homeowner would be vulnerable to higher repayments. However, a remortgage could offer a lower interest rate as well as a fixed rate deal to lock in the rate and shield the homeowner from increases.

Experts are warning of more rate hikes to come due to inflation. There are now forecasts of further strains from inflation due to pay wage hikes.

The Bank of England’s Monetary Policy Committee (MPC) has increased the standard base rate during each of the last thirteen consecutive meetings to combat inflation. The last meeting was met with a rate hike double of what had been expected. The rate increased by 0.50% versus the highly forecasted 0.25% and took the base rate to 5.0%.

There is not a meeting in July, but there is one in August and another rate hike is highly likely according to experts. If it does occur, lenders will probably see this as another measure of difficulty for borrowers and they will see higher risk in accommodating lending requests which could lead to even higher rates offered with mortgages and remortgages.

The current two-year average is slightly higher than the peak reached last autumn after the announced mini-budget pushed the rate to 6.65%. Unfortunately, while that rate peak saw a correction and lowered with new government budget measures, the current average rate of 6.66% is likely to disappear quickly and be replaced with a new and higher average versus one lower.

The average lending rate for five-year fixed mortgages also rose above the high peak reached last autumn to 6.17%.

A concern for homeowners is the recent expectations for the August MPC meeting. Another 0.50% increase is forecasted, and it could reach at least 6.0% by the end of the year.

In addition to facing higher rates, borrowers will have fewer choices when they shop mortgage or remortgage products. Lending was competitive but is becoming less so. In pulling their lower rates or highly incentive deals from the market, they are not being immediately replaced. While new deals with higher rates are coming onto the market, there are more being pulled than being offered. As of Monday, there were 4,631 mortgage products and as of Wednesday there were 4,344 total offers available for borrowers.

Experts are encouraging homeowners to consider longer terms and fixed rates, and to definitely shop for a remortgage if they are in danger of paying a higher rate with future MPC votes. 

It is easy to shop online for a remortgage. For a one stop shopping experience and perhaps an exclusive deal, visiting a remortgage broker could be helpful. In a matter of minutes, a homeowner could have numerous quotes from a variety of lenders to review and compare. They could also visit the websites of individual lenders to gather remortgage quotes.

Homeowners could secure a fixed rate now versus when higher rates are likely to be offered in only a few weeks. Also, a remortgage could be the opportunity to save money and perhaps also save peace of mind by knowing one is not paying more than necessary and they are shielded from the forecasted increases due in the months ahead.