Mortgage rates are on the rise again, and lenders are taking a cautious approach as winter approaches. This comes after a series of drops in mortgage interest rates, which have now slightly worsened for new and renewing borrowers, according to Moneyfacts. The average rate for a two or five-year fixed-rate mortgage stands at around 5%, which is a significant improvement from the peak rates of recent years, but still a challenge for many homeowners. Analysts predict that the Bank of England is unlikely to cut base rates further in the near future, and the uncertainty surrounding the upcoming budget adds to the market's volatility. Despite a slight increase of 0.02 percentage points over the month, the average two-year mortgage rate is now 4.98%, and the average five-year rate is 5.02%. With over 80% of mortgage customers having fixed-rate deals, the interest rates on these mortgages remain stable until the deal ends, typically after two or five years. This situation is particularly challenging for first-time buyers, who are hoping for low mortgage rates to secure their first home. Moneyfacts' Rachel Springall warns that the current situation may be disappointing for borrowers, as volatile swap rates and cautious lenders have halted the consecutive monthly average rate falls. Swap rates, which reflect the market's view of the Bank of England's interest rate direction, influence lenders' rate-setting. Simon Gammon, a managing partner at Knight Frank Finance, explains that lenders are responding cautiously, with some increasing rates, leading to a slight overall average increase. He reassures that this is unlikely to be the start of a sustained rise in borrowing costs but rather a temporary plateau while the market outlook becomes clearer. It's worth noting that current rates are significantly lower than they were two years ago, with the average two-year deal rate at 6.67%. Homeowners who have become accustomed to lower rates during the 2010s are now facing higher monthly repayments, adding to the rising cost of living pressures. The government has committed to supporting people with the cost of living, and the upcoming budget, to be delivered by Chancellor Rachel Reeves in November, will play a crucial role in shaping the financial landscape. Ms. Springall advises borrowers to consider their individual circumstances and seek professional guidance when needed. She emphasizes the importance of independent advice to navigate the mortgage market and avoid feeling pressured to secure a deal based on budget rumors. The Institute for Fiscal Studies has also weighed in, suggesting that the chancellor should avoid 'directionless tinkering and half-baked fixes' to boost tax revenue in the budget.
