Mortgage rates continue to fall but 485,000 brace for payments surge

Experts are predicting mortgage rates will continue to fall as the drop in inflation means the Bank of England is unlikely to hike rates for much longer.

The latest CPI figures for inflation show the rate of price increases dipped from 6.9 percent for the year to July to 6.8 percent in August.

Matt Smith, mortgage expert at Rightmove, said experts are still predicting the central bank will hike rates by 0.25 percent tomorrow but further rises above this are “a lot less likely”, providing relief for those on variable rate mortgages.

He commented: “The pace of rate reductions accelerated last week as anticipated, as lenders responded to swap rate reductions with rate cuts and intensifying competition.

“Today’s news means it is likely that confidence will continue to increase amongst lenders in the coming weeks with the trajectory of rates remaining downward.”

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However, some 485,000 homeowners are on fixed term deals that are soon to expire meaning they will face much higher rates when remortgaging.

Figures from Rightmove showed the average five-year fixed mortgage is at 5.63 percent up 4.32 percent from a year ago.

Those looking to get a two-year fixed rate mortgage face average rates of 6.16 percent at present, up from 4.44 percent a year ago.

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Zahra Hassan, co-founder of Eligible, said: “The fundamental problem is that mortgages are a financial product that customers take out only once every three to five years.

“This means that they aren’t regularly engaging with their mortgage and aren’t in the loop of what all their options are.

“In a broader sense, rising interest rates, coupled with increased energy and living costs, heighten vulnerability to default.

“However, the key factor that pushes someone from financial strain to actual default is their lack of awareness about the array of options that their bank could have offered to temporarily ease their financial burden, particularly on their largest financial obligation – their mortgage.”

More than 750,000 UK households are at risk of defaulting on their mortgage as they can’t afford the payment as well as their other daily costs.

The average monthly repayment for a five-year fixed 85 percent LTV mortgage, for a typical first-time buyer type property, is at £1,198 a month, up from £1,039 a month from a year ago.

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