3 valuable benefits of working with a broker when interest rates are rising
Over the last decade, if you have a mortgage you’ve likely benefited from record low interest rates. For more than 10 years the base rate sat below 1%, even reaching a record low of just 0.1% at the start of the Covid-19 pandemic.
In recent months, however, the Bank of England (BoE) has raised interest rates in an attempt to control soaring inflation, which hit 9.4% in the year to June 2022.
Interest rates have risen six times since December 2021, now sitting at 1.75%, with further rises expected later this year and beyond.
The knock-on effect of the BoE’s actions is that the cost of new mortgages has risen sharply.
Data from financial analysts Moneyfacts reveals that the average interest rate on a two-year and five-year fixed-rate mortgage hit a nine-year high in July, with the cost of both types of deal experiencing the largest month-on-month rise on record.
Read on to find out more about why your next mortgage is likely to cost you more, and three ways working with a broker can help you when rates are rising.
The cost of fixed-rate mortgages hits a 9-year high
According to the latest Moneyfacts data, the cost of the average two-year and five-year fixed-rate mortgage has risen for nine consecutive months.
Two-year deals cost, on average, 1.4% more than they did in December, while the average five-year deal now costs 1.25% more – despite the base rate rising by just 1.15% during that period. The chart below shows how quickly the cost of borrowing has risen in the UK.
Source: the Times
The Times reports that the average of the lowest fixes available from the six largest high street lenders – Barclays, HSBC, Halifax, NatWest, Nationwide and Santander – was 1.29% in December but had risen to 3.36% by mid-June.
On a £200,000 loan, the newspaper says the increase in rate on the two-year fix would cost you an extra £206 a month – from £780 to £986.
3 valuable benefits of working with a broker when rates are rising
If you’re looking to buy a property in the near future, or your existing deal is coming to an end in the next six months or so, you’re likely to find that the cost of borrowing has risen.
So, it’s vital to act now in order to secure the best rate you can – and working with a broker like Altura can offer valuable benefits.
1. You can be assured of finding the right rate from the market
One of the key benefits of working with us is that we’re independent, meaning we can access mortgage deals from across the market.
We work with dozens of the UK’s leading lenders and can often access products not generally available direct to borrowers. You’ll save time by not having to shop around yourself, and our strong relationships with banks and building societies mean we can often discuss your application directly with a lender to ensure they can agree the amount you need to borrow.
2. A broker will work hard to “reserve” a deal for you
When rates are rising, lenders often withdraw deals at very short notice. You can suddenly find a product is no longer available, meaning you’re forced to pay a higher rate.
Indeed, Mortgage Strategy recently reported that the average time a mortgage product will remain on the market is currently just 17 days – a record low.
Experienced brokers like Altura can help you to secure low-cost borrowing by “reserving” deals on your behalf.
We frequently work late into the evening on behalf of clients, submitting applications to lenders ahead of midnight deadlines to ensure our clients can take advantage of competitive deals before they are withdrawn.
Working with an expert can be the difference between securing a great rate and not – potentially saving you a significant amount over several years. It’s the sort of service you won’t get from your local bank!
3. Help with completing the transaction on time
Once we have “reserved” a deal on your behalf, the lender will normally require you to complete the transaction within a certain period of time – typically three to six months.
Working with a broker can help to smooth that process, as our strong relationships mean we can manage the transaction right through to completion, securing you the low-cost borrowing you need.
Get in touch
If your mortgage deal is coming to an end, or you’d like to find out how we can help you secure a great deal in a world of rising interest rates, please get in touch via our Contact Us page.
