Property experts have warned homeowners not to make panicked decisions on mortgage deals as the impact of Kwasi Kwarteng’s resignation is likely to take time to filter through.
After September’s mini-Budget from Mr Kwarteng, who was sacked as Chancellor on Friday, mortgage brokers were at one point fielding around 10 rate changes a day from lenders.
Prospective buyers have been unsettled by contracted deadlines to submit applications for rates before lenders reintroduced them at much higher prices.
Adrian Anderson of property finance specialist, Anderson Harris, told i: “For the last three weeks, we’ve seen mortgage rates increase very quickly, very sharply. And the average mortgage rate now – two years or five years – the average rate is above 6 per cent.”
Mr Anderson said he hoped news of Mr Kwarteng’s resignation would lead to “a bit more stability”.
“I hope it’s going to calm the markets a bit restore some sort of confidence in the Government,” he said. “I’m hoping the markets will react well to his resignation because the market did not react well to the mini-Budget three weeks ago.”
But he added that we are “not out of the woods” yet.
Meanwhile, worried homeowners, including many whose mortgage deals are coming to an end, have sought to switch early even if doing so incurs penalties.
Some clients have been in tears after their mortgage rates fixed at 1 or 2 per cent, look set to rise to around 6 per cent next year.
Kirsty Miller, mortgage lead at family mortgage broker Tembo, told i: “We’re seeing a lot of people, even [whose deals are ending] within the next year, that are contemplating paying early exit penalties with their current mortgage lender even though they’ve got lower rates, they’re looking to secure higher rates now, just in case the rates continue to rise.”
She added: “That, combined with the cost of living crisis, is really scary for a lot of people and a lot of people are actually so worried that they’re not going to be able to keep their home.”
Ms Miller, who owns her own home, said concern about how high the rates would rise by the time she came to remortgage led her to opt for a fixed rate for five years for the first time since she became a homeowner over a decade ago.
But Ms Miller said the best course of action would vary for each homeowner.
Ms Miller said homeowners who fear they won’t be able to keep their homes because of the housing market turbulence following the mini-Budget and U-turn chaos should shop around for mortgage advice before making rash decisions.
She added: “There’s never a better time to speak to a broker and actually get advice from across the market rather than just going to your existing lender or your bank on the high street.
“Also there are lots of options, you could look for a re-mortgage deal and secure that and just keep it there for say, up to six months.
“You don’t even have to take it out. You could secure a rate now, but then you could see how the markets are going over the next few months and then if your existing lender offers you a better deal, you can then take that. Equally if the rates come down, you can look at a different option.”
Both Ms Miller and Mr Anderson said that people with mortgages set for renewal were also considering tracker rates which could potentially work out cheaper each month, but noted that these pose a greater risk.
As well as existing homeowners, first time buyers have been stressed by the changeable market.
Analysis from Zoopla suggests the number of people looking to buy homes has dropped by a fifth since the mini-Budget.
Ms Miller told i she imagines a lot of prospective home buyers will “peter off now until the new year”.
“I guess you’ve got to ask yourself the question, would you buy a house in this in this climate? I think if I had all my ducks in a row, and I could afford it and it was still cheaper than my rent, then I probably would.
“It’s a long term savings pot. But if you are a little bit tight on affordability or you haven’t quite got the deposit, those sorts of things make people think twice.”