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Lenders Still Want to Lend - The Impact of Inflation on Mortgage Deals

Writer's picture: Ricky GandhiRicky Gandhi

Inflation is on the rise in the UK, and it's having a knock-on effect on mortgage deals. In this blog post, we'll take a look at how inflation is impacting mortgage rates, and what it means for borrowers.


Impact of inflation

How is inflation impacting mortgage rates?

When inflation rises, it means that the cost of living is increasing. This can make it more expensive for borrowers to afford their monthly mortgage payments. As a result, lenders tend to raise their mortgage rates in order to protect themselves from the risk of borrowers defaulting on their loans.

In the UK, the Bank of England has been raising interest rates in recent months in an attempt to combat inflation. This has led to an increase in mortgage rates across the board. According to the latest data from Moneyfacts, the average two-year fixed rate mortgage is now 5.34%, while the average five-year fixed rate is 5.15%.

What does this mean for borrowers?

The rising cost of living and the increase in mortgage rates are putting a squeeze on borrowers' finances. This is particularly the case for those who are on variable rate mortgages, as their interest rates will automatically increase in line with the Bank of England's base rate.

If you're on a variable rate mortgage and you're struggling to afford your payments, you may want to consider remortgaging to a fixed rate deal. This will give you certainty over your monthly payments for the length of the fixed rate period.

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Lenders

What can borrowers do to protect themselves?

There are a few things that borrowers can do to protect themselves from the impact of inflation on mortgage rates. One is to make sure that you're on the best possible deal. You can do this by comparing mortgage rates from different lenders.

Another thing you can do is to build up a financial buffer. This will give you some breathing space if your monthly mortgage payments increase. You can build up a buffer by setting aside money each month into a savings account.

Finally, it's important to stay informed about the latest economic news. This will help you to make informed decisions about your finances.

Will the impact of inflation on mortgage rates last?

It's difficult to say for sure how long the impact of inflation on mortgage rates will last. However, it's likely that rates will remain high for some time. This is because the Bank of England is committed to bringing inflation back under control.

If you're thinking about remortgaging, it's important to factor in the impact of inflation on mortgage rates. You should also consider your own financial circumstances and whether you can afford higher monthly payments.

Conclusion

The impact of inflation on mortgage rates is something that all borrowers need to be aware of. If you're struggling to afford your monthly payments, you may want to consider remortgaging to a fixed rate deal. You should also make sure that you're on the best possible deal and that you're building up a financial buffer.


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