Households are “clambering” to secure new mortgage deals before November’s Budget because of fears that the policies announced could send rates higher.
Mortgage brokers say borrowers who are coming towards the end of their current fixes are getting in touch earlier than usual to try and lock in a rate in advance.
Home loan costs have been ticking upwards in recent weeks and some borrowers fear larger increases over the winter.
There are several ways that the Budget could push up mortgage rates, with one being if the policies in it are seen as inflationary.
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This could keep the Bank of England base rate higher for longer, which would feed into mortgage rates.
Chancellor Rachel Reeves has signalled taxes may have to rise at the Budget, and certain tax rises, such as increases to fuel, alcohol or tobacco duties, can push prices, and therefore inflation, upwards.
“There are many existing borrowers clambering for a new mortgage deals pre-budget just in case rates go sky high”, explained Justin Moy, managing director at EHF Mortgages.
Borrowers can generally lock in a new mortgage rate several months before their current deal ends, with experts suggesting getting in touch with a broker six months before your current term ends.
If rates rise you can keep the price you have been offered, but if they fall, you can switch to a cheaper deal.
David Hollingworth, associate director at L&C Mortgages, added: “It does look like there are some borrowers that are looking to move sooner to secure a rate due to concern that the Budget could have a negative impact on mortgage rates.
“Some are looking as much as six months ahead of the end of their current deal to get a rate in place, in case the news from the Chancellor causes rates to climb.”
Government policies can also push up mortgage rates if they cause financial markets to worry that the public finances are not on a sustainable footing.
This can push the cost of UK Government borrowing, which may feed through into mortgage rates.
This happened in 2022, when Liz Truss’s mini-budget resulted in mortgage rates spiking.
Nick Mendes, head of marketing at John Charcol brokers, said: “Clients are asking: ‘will we see a Lizz Truss 2.0 in the next Budget?’ Chatter among brokers says a few clients are asking whether another looming fiscal crisis could send mortgage rates spiraling.”
He said that a repeat of 2022 was very unlikely, as the aftermath of that fiscal event was about “speed and surprise,” with the administration announcing a series of unfunded tax cuts.
But mortgage brokers still say securing a good deal several months before your mortgage ends is always a good option.
Jane King, mortgage and equity release adviser at Ash Ridge, said: “It’s impossible to predict rates so I am securing a rate for a client as soon as possible with a view to altering it if their rate reduces over the next three months before their new rate kicks in.
“Although its time consuming it is, in my opinion, the best option for the client. This way you have a good rate secured now and also the option to change. I do this for all clients all the time.”
Last week, figures from Moneyfacts showed average mortgage rates had risen for the first time since February.
Fixed mortgage prices are heavily based on swap rates, which follow long-term predictions for where the Bank of England base rate will go in the future.
Some deals below 4 per cent are still available for those with large amounts of equity in their properties, though they are becoming increasingly rare.
The next Budget is set for 26 November and Reeves is expected to announce a series of tax rises.
The Institute for Fiscal Studies (IFS) suggests she will need to find £22bn to make up a shortfall in government finances, and will “almost certainly” have to raise taxes.
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