Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Mortgage rates surge amid housing boom

Mortgage rates

A similar hike in interest rates as the one seen in September was last recorded in 2009

Mortgage rates have skyrocketed in the last few months, with the average home-owner paying up to £480 more interest on their fixed-rate deal every year.

The cost of an average two-year fixed-rate mortgage – which had an interest rate of 2 per cent in June – now stands at 2.24 per cent.

Because of this increase, a homeowner who has a £132,128 mortgage – the UK average – will see an extra £330 on their bill every year.

A spike in interest as drastic as the one seen in September was last recorded in 2009.

The interest figure for a five-year fixed-rate mortgage was 2.25 per cent in July. It now stands at 2.62 per cent – causing a yearly mortgage payment to increase by £480, Moneyfacts found.

Countless Britons have rushed to cash in on Rishi Sunak’s stamp duty cuts announced in July – allowing buyers to avoid paying the tax on houses up to £500,000 – causing demands for loans to increase drastically.

Also contributing to the initial housing boom was the nation’s pent-up buyer demand post-lockdown – as well as a rush to get bigger houses outside of urban areas in the new work-from-home age.

In response, house prices have shot up too, now standing at 7.3 per cent higher than the year before, a report from Halifax revealed.

The cost of an average UK home is £249,870. This time last year it was £232,806.

But even with a rush to buy, coronavirus impacting people’s livelihoods has meant banks have had to waive overdraft fees and grant mortgage payment holidays – among a draft of other measures.

Analyst at Investec Ian Gordon told The Times: To put it bluntly, banks have to claw back their revenues from somewhere. They have been so swamped with demand from home movers and first-time buyers that they have been able to price up across the board.

It follows reports that more than half of mortgage customers who have tried to get in touch with their lender during the coronavirus pandemic have struggled to get through.

Some 56 per cent of borrowers who contacted or attempted to contact their lender reported having a problem, with issues including long phone queues and lenders failing to reply to messages left by phone or email, a survey by Which? found.

More than a fifth of those questioned said they had contacted or attempted to contact their lender since the start of the pandemic and six in 10 of those requested a payment holiday, a survey of more than 3,600 mortgage-holders found.

While some customers have struggled to get through to their provider, Which? said it has awarded some lenders ‘recommended provider’ status due to these companies scoring highly in both its customer satisfaction research and its analysis of the top mortgage deals.

It said that First Direct, Nationwide and Coventry Building Society have been rated the UK’s top mortgage lenders, according to its findings.

First Direct achieved excellent customer scores and was also rated highly for the transparency of its charges and keeping customers informed, Which? said.

Similarly, Nationwide and Coventry Building Society were also rated highly in the customer survey as well as the Which? analysis of lenders offering the cheapest deals.

Both were named Which? recommended providers.

At the other end of the spectrum, Chelsea Building Society was placed at the bottom of this year’s table, while specialist lender Kensington finished second from the bottom.

Which? money editor Jenny Ross said: Choosing a mortgage is one of the biggest financial decisions people will ever make, and our analysis provides help for those who want to know which lenders combine the best service and cheapest rates.

Ross said, good customer service and communication have proven particularly vital since the start of the pandemic, so prospective buyers and re-mortgagers should factor them in as two of the most important aspects of choosing a mortgage, along with getting a good deal.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.