03rd November 2022

"As absurd as it sounds, mortgage rates might reduce" - reaction from brokers and IFAs

Austin Johnson, founder at Colchester-based Mortgages for Actors: "Although the base rate is still not that high when compared to 15-20 years ago, such a sharp and sudden hike for those who have been fixed very low for very long will leave them reeling at the change. Borrowers on the whole will be affected, but worst hit will be the people whose fixed rate ends in the next few months. Some people could see their monthly payment double. People on variable rates, especially portfolio landlords, will need to get the ball rolling ASAP as they will have increasing costs across their whole portfolio. Even the people in the middle of a long fix will now be limited in their flexibility. If they suddenly needed to get out of the fix, they will be hit with a huge hike in rate. Movers will be wary of moving, buyers will be wary of buying and rents will rise to make up for this. Property prices will need to come down to cope with the change if we want to keep this market moving smoothly. With things as they are, people need to talk to their broker to ensure they get the best possible deal."

Paul Holland, mortgage broker at Chatham-based Henchuch Lane Financial Services: "Fixed rates have already factored in this increase so they shouldn't move any further north. They tend to be based on swap rates, which if anything, are now coming down as some confidence is restored to the market following the U-turn on everything Kwasi and Truss did. Tracker rates and variable rates will of course go up as a result of Thursday's rate rise, but there is such a huge gap between the bank rate and fixed rates that we shouldn't see any further hikes in the short term. Anyone exiting their mortgage now and in the foreseeable will be having a shock in comparison to the rates they're used to and we're currently dealing with clients whose mortgages are going up by £500-£1000 per month. This is making the energy crisis seem like a drop in the ocean and there will be a lot of people defaulting on their mortgages or selling their houses in the medium term. Savers on the other hand should of course start to benefit from this."

Ashley Thomas, director of London-based mortgage broker, Magni Finance: "As expected, the base rate has increased to 3%, although mortgage lenders will have priced this in over the past month already. As absurd as it sounds, you might find that more mortgage rates will reduce as the base rate has not increased as high as some feared. Clearly the appointment of Rishi Sunak as PM has had a significant and positive impact for the mortgage market and therefore homeowners."

Justin Moy, founder at Chelmsford-based EHF Mortgages: "This rate rise was not unexpected and will bring us in line with similar economies around the world. What we now need to see is some stability among fixed rate mortgage products, given we have had some minor reductions in the last week or so. A bigger problem will be the affordability assessments and stress testing on both residential and buy-to-let mortgages, as the amount you can borrow will inevitably reduce again."

Elliott Benson, mortgage broker at Sett Mortgages: "Though this is the rise we were all anticipating, it will still come as a shock to many homeowners. The days of ultra-cheap mortgage finance are now over. I would advise anyone who is still thinking of buying or remortgaging to keep calm, seek professional advice and take the right decision for their own circumstances. Never has independent mortgage advice been more important."