Borrowers forced into long-term mortgage offers
Borrowers are being priced out of two-year
mortgages and are being forced into longer-term deals due to sharp increases in interest rates.
Two-year mortgages are being pulled at little or no notice and are being re-priced at substantial premiums. For example, Halifax this week increased it's two-year
fixed rates by half a percent, while other lenders have withdrawn two-year mortgages completely.
The best five-year fixed rates now start at 5.39 per cent with the cheapest two-year fixed rate at 5.79 per cent, with many lenders charging 6.09 per cent or more. The market has been turned on its head in recent times due to the liquidity squeeze.
Lenders prefer a gradual flow of customers coming to the end of their mortgage deal, and by offering competitive rates on two-year fixed rates they face another potential influx of borrowers remortgaging when these deals come to an end. This leads to oversupply and forces rates up.
The government has indicated that it may be willing to free up additional funds which should alleviate the liquidity problems and bring down the cost of borrowing for banks.
Tags:
mortgages, borrowing, Government