What separates one fixed rate offer from another?
There is little difference between two-, five- and 10-year fixed rates, according to Vincent Burch (pictured), mortgage director at Vincent Burch Mortgage Services.
He explained that this is the case despite the continued increases to the base rate by the Bank of England, with the most recent coming at the beginning of May.
Burch went on to say that it is true that net mortgage borrowing increased from £4.6 billion in February to £7 billion in March, and this figure is much higher than industry experts forecast.
“However, when we look at broader lending figures, we can see the first quarter of 2022 residential mortgage lending was £17.5 billion, which is much lower when compared to £23.2 billion during the same period in 2021,” he added.
Despite this, Burch said that the cost of funding is increasing with the Bank of England raising the base rate again, coupled with the SWAP rate market being incredibly volatile.
Read more: Bank of England hikes rate to highest level in 13 years
According to Burch, as a result of the uncertainty in the market, he has seen many lenders launching tracker rate mortgages.
“As you can imagine, most clients are not keen on a variable mortgage, especially when rates are increasing,” added Burch.
On top of this, Burch said that the firm has been receiving numerous calls from clients who are looking to remortgage as early as possible, sometimes even when this incurs an early repayment charge.
Read more: Remortgage boom as cost-of-living increase bites
He said that the clients are desperate to lock in a rate that they can secure now, which is likely to be much higher next year. With the Bank of England expected to continue increasing the base rate, many lenders are anticipating this by upping their rates early.
“Lenders are changing their interest rates and products on a more regular basis, and some, unfortunately, at very short notice,” Burch said.
With so much changing in such a short period of time, Burch said that it is becoming increasingly challenging to keep up with all of the developments.
“We have noticed inaccurate products on the mortgage sourcing systems which show that everyone involved is finding it a headache to keep things updated,” he added.
Despite increasing rates and uncertainty in the market, Burch outlined that house prices have continued to rise. He went on to explain that this is because of limited stock and more people chasing a fewer number of properties.
As the quantity of properties on the market has continued to fall, cash buyers have become increasingly popular due to the speed at which a deal can be completed, and chain free buyers have also risen in their desirability.
However, while prices have continued to rise, the UK is currently enduring a cost-of-living crisis, with gas and electric prices skyrocketing in part due to the war in Ukraine. As a result, industry figures believe that house prices will only rise so far.
