Why you won’t pay 10pc for your mortgage – despite claims on Question Time

house with money and Sold signs, mortgages, interest rates
house with money and Sold signs, mortgages, interest rates

High street banks are not charging interest of more than 10pc to mortgage customers, despite suggestions that borrowers are being charged double-digit rates.

A clip from BBC One’s Question Time has been shared widely online, where an audience member said she was quoted a rate of 10.5pc for her new mortgage.

However, according to price comparison website MoneySuperMarket’s mortgage search tool, the highest rate on the mainstream market is 7.44pc from Kensington Mortgages. This is based on buying a £180,000 property with a £30,000 deposit.

Are mortgage rates hitting 10pc?

Interest rates have risen to heights not seen since the aftermath of the financial crisis this week as the economy stalled.

Lenders pulled deals at a record rate as the pound plummeted and high street banks scrambled to get ahead of further interest rate rises by the Bank of England.

The average two-year fixed-rate has jumped from 4.74pc on the day of the mini-Budget to exceed 5pc in the space of a week, with further rate rises inevitable according to experts.

But while social media has been rife with talk of mortgage rates already exceeding 10pc, this is only a reality for a very small minority of borrowers, brokers said.

Lewis Shaw of Shaw Financial Services, a broker, said: “The vast majority of people searching for a fixed-rate mortgage are looking at rates at between 4-6pc.

“Currently anything above the 7pc mark, or in double digits, will likely be for a borrower with credit history or someone on a debt management plan. But it is not the norm for most borrowers.”

What mortgage deals are still available?

Mainstream lenders who pulled deals for new borrowers earlier this week are now relaunching them with rates up to 1.2 percentage points higher than those available days ago.

For example Barclays will launch a five-year fix at 5.82pc tomorrow for borrowers with a 5pc deposit, as part of its new range. Last week the same mortgage was available at a rate of 4.62pc.

Virgin Money relaunched fixed rates for new borrowers today, with the cheapest starting at 5.29pc and Nationwide earlier this week increased its rates up to 6.69pc.

There are still sub-4pc deals available, such as the 10-year fix with Barclays priced at 3.65pc, but these are unlikely to survive much longer.

Lenders are not obliged to offer borrowers the rates advertised on their websites and they ultimately price a loan based on how much risk they believe they are taking on, meaning borrowers with an impeccable credit history will get the best rates.

Unfortunately anyone with debt or black marks on their credit file will likely be offered higher rates and will need to use a specialist lender, rather than any of the big names on the high street.