Nervous homeowners on edge as mortgage rates hit highest level since 2016 with market fading fast
The latest Bank of England data found last week that net borrowing of mortgage debt by individuals decreased to £5.3bn in June, from £8bn in May.
Approvals for house purchases, an indicator of future borrowing, decreased to 63,700 in June, from 65,700 in May, which is below the 12-month pre-pandemic average up to February 2020 of 66,700.
Approvals for remortgaging, which only capture remortgaging with a different lender, decreased to 44,000 in June, from 47,200 in May.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 20 basis points to 2.15 per cent in June, effectively the highest since 2016.
Discussing the figures with City PM this morning, Andrew Fisher, chief commercial officer at digital lending marketplace Freedom Finance, said: “Mortgage borrowing has remained incredibly resilient through the current economic headwinds.”
“But as rates continue to ratchet up and more people come to the end of their historically low fixed-term rates the market is becoming more challenging,” he added.
“The effective interest rate is now 2.15 per cent, its highest level since 2016.”
Andrew Fisher
“The effective interest rate is now 2.15 per cent, its highest level since 2016, which will pose increasing difficulties around affordability, particularly when combined with other significant pressures on household budgets like the soaring price of energy,” he noted.
“The latest Bank of England data already found that banks had cut back mortgage lending at the sharpest rate since the depths of the first lockdown amid fears of a recession.”
“For those who are coming to the end of their fixed-term, borrowers should move quickly and ensure they are shopping around to lock in the best rate they’re eligible for ahead of even higher rates and increasingly choppy financial waters,” Fisher concluded.