Brokers react to fixed rates breaching 6%
The average rate for a two-year fixed-rate mortgage has risen to 6.01%, according to the financial information service Moneyfacts.
Mortgage Introducer sought the views of brokers on rising fixed rates, with their reactions varying from the perception of scaremongering, to calling for a cross party mortgage task force to quash the issue.
Scaremongering over fixed rates
“It is irresponsible scaremongering; average is a terrible word and from my own sourcing, two-year fixed-rate mortgages are still available in the low 5% range,” said Jonathan Burridge (pictured), founding adviser at We Are Money.
Burridge said aside from Moneyfacts’ data being questionable, he believes all this sensationalism simply causes panic and instability.
“We need to keep calm; rates have returned to ‘average’ levels if you look at the last 40 years or so,” he added.
While Burridge believes it is going to be painful for many and they need to speak with balanced professionals who can assist, he said it is unnecessary that customers are being “scared to hell by headline-grabbing stories”.
Hannah Bashford, director at Model Financial Solutions, said an average two-year fixed rate of 6% sounds scary and will certainly grab headlines, but in reality, she concurred that there are still plenty of rates available just above 5%.
The estimated average by Moneyfacts, Bashford said, will take into account specialist lenders whose rates are between 7% and 8%, as well as the mainstream lenders down at 5.4%.
“Consumers are worried, though, and it is the right time to seek expert advice as market conditions are proving complex at present,” she added.
Ross McMillan, owner and mortgage adviser at Blue Fish Mortgage Solutions, said in the current uncertain economic climate, the average mortgage rate across all levels has unquestionably risen in recent weeks, but he believe it is important, beyond sensational headlines, that context is also applied.
“Alongside the initial deal length, loan-to-value (LTV) bands continue to have a bearing on lender risk assessment and associated rates, and the higher rates being focused on are most prominent at the peak of lenders’ risk areas, namely 95% LTV,” he said.
For many people remortgaging, McMillan said they will be looking at significantly lower LTVs, with fixed rates closer, in many instances, to 5%.
McMillan said the hope remains that inflation figures exceed expectations this week and the Bank of England refrains from further rate hikes and offers some respite from the volatile marketplace, even if only temporarily.
“However, it is important to note that claims of an impending crisis are misleading and irresponsible, as it is worth outlining that mortgage rates have now returned to ‘normal’ levels when considering historical trends,” McMillan added.
Mortgage task force
Riz Malik, founder and director at R3 Mortgages, said we urgently need a cross-party mortgage task force to find potential solutions to this ‘ticking time bomb.’
He believes the task force should be comprised of economists, lenders and other stakeholders who are actively involved in the mortgage market.
“We need action or the impending financial earthquake is going to send shockwaves across the country,” Malik added.
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, said the government needs to change the mandate of the Bank of England, so that they put more weight on the future of the economy and give their inflation target a longer term time horizon.
“This would allow them to maintain their independence but take their foot off the accelerator when it comes to rate hikes,” said Mather-Holgate.
Confidence breeds confidence, and Mather-Holgate believes a pause in rate rises will mean lenders stabilise their product offerings and the resulting competition would drive prices downwards.
What is your view on the news that average two-year fixed rates have surpassed 6%? Let us know in the comment section below.
