average two-year fixed mortgage rates have just hit a 15-year high of 6.66%.
Here’s what to expect, from the committee:
The cross-party Committee of MPs will examine the current state of the mortgage market, including levels of mortgage stress, arrears and forbearance, and the outlook for the market in light of higher interest rates.
The Committee will question mortgage providers on consumer behaviour following recent rate rises, the impact on house prices and the wider housing market, and mortgage affordability and availability.
Government support schemes and the recently agreed ‘mortgage charter’ are also likely to be discussed, as are buy-to-let mortgages and the rental market, and the take-up of long-term fixed rate deals.
Here’s the panel:
Andrew Asaam, Homes Director, Lloyds Banking Group
Bradley Fordham, Mortgage Director, Santander UK
Charlotte Harrison, Interim CEO (Home Financing), Skipton Building Society
Henry Jordan, Home Commercial Director, Nationwide
Nigel Terrington, Chief Executive, Paragon Banking Group
Time for a recap.
UK borrowers continue to be hit by rising interest rates as the fight against inflation continues, and there may be more pain ahead.
Average two-year mortgage rate have risen over their peak last autumn, averaging 6.66% today for the first time in 15 years.
MPs have heard that rising mortgage rates are causing financial stress to customers, and that the situation will worsen. However, lenders also reported that they have not seen a significant pick-up in arrears yet.
Bradley Fordham, mortgage director at SantanderUK, told the Treasury Committee the bank had seen a “small tick up in arrears, still 20% below pre-pandemic, 70% below 2009 post-financial crisis, so relatively low levels”.
He said mortgage customers coming off deals and going onto new ones were seeing payment increases of “over £200 per month”.
But, the UK could be approaching a ‘tipping point’ where mortgage rates rise to levels where borrowers cannot fully protect themselves by extending the terms of their loans or moving to interest-only deals.
The International Monetary Fund warned that UK interest rates may need to keep rates higher for longer, to fight inflation.
The financial markets are anticipating that UK interest rates will hit 6% by November, up from 5% at present.
The latest labour market report has shown that UK wages increased at a faster rate than expected in May.
Earnings growth hit 7.3% in the three months to May compared with a year earlier, driven by the strongest rise in private sector pay growth outside the pandemic period of 7.7%, the Office for National Statistics said. It was the joint highest since modern records began in 2001.
And with unemployment rising, number of job vacancies down, jobs growth slowing and more people looking for work, there are signs that the UK labour market is starting to slow.
And in other news…
Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.
Britain’s retailers recorded a sharp rise in spending in June as hot weather prompted consumers to buy summer clothing and outdoor goods, despite growing pressure on budgets from the cost of living crisis.
Morrissey has written to Jet2holidays urging the tour operator to drop its association with marine parks that continue to use captive orcas and dolphins for entertainment.
On a monthly basis, prices fell – by 0.08% – the first deflation registered since September of last year.
This may encourage Brazil’s central bank to consider cutting interest rates from their current six-year high of 13.75%….
Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.
Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.
“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.
mortgage costs hitting their highest level in 15 years with an average rate of 6.66% will worry people further, at a time when “mortgage pressures on ordinary households are huge”, says Douglas Chapman, SNP MP for Dunfermline and West Fife.
Following today’s Treasury Committee hearing on the mortgage market, Chapman says:
Research this month from Citizens Advice Scotland reveals that around 11% of people always run out of money before payday, with a further 14% saying that this happens to them “most of the time”.
This percentage will surely rise given today’s Committee panellists’ discussing averages of £235 increases on monthly mortgage repayments due to large interest rises and deals coming to an end, which on top of a crippling cost of living crisis, consistently high energy prices and rampant inflation explains why many people feel their financial resilience is being pushed to the limit.”
“In addition, there was little encouragement for first time buyers today, who it appears need to spend longer amassing a larger deposit or tap into the Bank of Mum and Dad (which isn’t an option for everyone), and then also choose from a narrower portfolio of smaller properties in order to meet monthly mortgage payments and pass banks affordability stress tests.”
the increase in fixed-rate mortgage costs today is a sign of “Tory economic failure”
“Too often, families who are saving for their first home but getting no closer to buying it feel like they’re doing something wrong.
“But the fact of the matter is that the Tories have inflicted households with a mortgage bombshell, let renters down and failed to build the homes we need.
“Millions are feeling the pain from this Tory economic failure.
“Labour has a plan to start fixing this crisis. We would stop households missing out on the mortgage support they need by making measures mandatory, we will give greater rights and protections to renters, and we will take the tough choices to get Britain building.”
A chart showing Nationwide house prices
Andrew Asaam from Lloyds Banking Group told MPs house price falls could leave some mortgage holders in negative equity (owing more than their property is worth).
But MP also heard there is less risk than in previous financial crisis, as loan-to-value rates are relatively low.
Asaam told the Treasury committee this morning
“The place that this probably bites most is for first-time buyers, who will be typically at higher LTVs (loan to value rates).
“It’s a completely individual situation, but we still think owning a home for most people is better than renting.
“And therefore we want to keep products available at higher LTVs for first-time buyers.
“But we need to make sure that those first-time buyers are resilient, ie they can afford to stay in their homes through a two-year period where house prices might be falling, for example, and they are aware that they could end up in negative equity.”
From the hustle and bustle of Union Square to the peaceful tranquility of small villages like Cold Spring, New York is a great pace to live and work. New York residents have plenty of options when it comes to financial institutions, including some of the best credit unions and community banks in the country. Our goal is to make finding the right bank easier with this list of the best banks and credit unions in New York.
11 Best Banks in New York
New York City is known for Wall Street, but there’s far more to New York than its financial center. No matter where you live in the state, you can choose to go with a credit union, regional bank, local bank, or the biggest bank in the country. Don’t rule out online banks, either, since many have competitive offerings.
Here’s our list of the 11 best banks and credit unions in New York to help you narrow it down to one solid option.
1. New York Community Bank
It may be a New York bank, but New York Community Bank is one of the largest banks in the country. NYCB’s parent company is New York Community Bancorp, Inc., which also owns Flagstar Bank and has branches in New York, New Jersey, Ohio, Florida, and Arizona.
You’ll get access to more than 56,000 ATMs through NYCB’s ATM network, which includes both Allpoint and Presto! machines nationwide. NYCB also offers great rates on CDs. You can get a 6-month CD that earns 4.50% APY or a 12-month CD with a rate of 4.25% APY.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
$1 minimum deposit to open
ATMs:
Fee-free at New York Community Bank ATMs
Fee-free at Allpoint and Presto! ATMs nationwide
$2.50 fee for each out-of-network ATM transaction
Interest on balance:
Up to 4.50% APY on CDs
Additional perks:
2. Chime
Chime is a modern online banking service that features a wide array of benefits, including fee-free overdrafts up to $200, early direct deposit access, and no monthly fees or foreign transaction charges.
With Chime, you can also get a secured credit card to help boost your FICO Score® with no interest or annual fees. In addition, it allows for fee-free transfers and savings growth with an APY of 2.00%.
You also stay informed with daily balance notifications and transaction alerts. Safety is a priority with secure processes in place, FDIC insured funds up to $250,000, and round-the-clock support channels for any assistance required.
Fees:
No monthly service fees
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 fee for out-of-network ATMs
Interest on balance:
2.00% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
SpotMe covers up to $200 in overdrafts
3. Chase Bank
National banks have plenty to offer, including expanded brick-and-mortar branches and a wide range of banking products. Chase Bank is one of the largest banks in the U.S., with branches and ATMs in 48 states and the District of Columbia.
Currently, Chase is offering a $200 bonus for its Chase Total Checking account. This account comes with a $12 monthly fee, but Chase will waive it if you receive at least $500 monthly in direct deposits, maintain a $1,500 daily balance, or have an average $500 daily balance across all your Chase accounts.
Fees:
$12 monthly fee (waived with requirements)
$34 overdraft fee
Balance requirements:
No deposit to open
No minimum balance requirement
ATMs:
Fee-free at 15,000+ Chase Bank ATMs nationwide
$3-$5 out-of-network ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 3.75% on CDs
Additional perks:
$200 bonus for new checking account
Bonus and 1.5% unlimited cash back on credit card
4. NBT Bank
Based in Norwich, New York, NBT Bank has branch locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine, and Connecticut. You’ll find two checking accounts that don’t charge monthly fees.
Classic Checking includes unlimited check writing and is designed for those who prefer the experience that comes with traditional banks. NBT’s eChecking account has you managing everything. The biggest benefit to eChecking is that your balance earns interest.
Fees:
No monthly fees
$35 overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at NBT Bank ATMs
$1.50 fee for out-of-network ATM withdrawals
Interest on balance:
0.01% APY on eChecking
Up to 0.03% APY on savings
Additional perks:
Competitive rates on loans
Multiple business checking accounts
5. Capital One
One of the top national banks in New York is Capital One, which has branches and cafés across the country. Although there are fewer branches these days, some locations have been turned into cafés with coffee and free Wi-Fi along with banking services. But wherever you are, chances are you’ll find a Capital One ATM. You can withdraw cash at any Capital One, MoneyPass, or Allpoint ATM nationwide.
Fees:
No monthly maintenance fees
No overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at Capital One ATMs
Fee-free at any MoneyPass or Allpoint ATM
$2 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.10% APY on savings
Up to 4.75% APY on CDs
Additional perks:
Cash deposits at any CVS location
Some branch locations have cafés and free Wi-Fi access
6. GO2bank
Online banks like GO2bank have their perks. You’ll often find competitive interest rates and low fees. However, mobile banking does have its limits, and that’s where GO2bank stands out.
You’ll not only be able to withdraw cash at any Allpoint ATM, but you can also deposit cash at more than 90,000 retailers across the country. As long as you’re okay with not having an in-person banking experience, GO2bank could be a solid option.
Fees:
$5 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
No opening deposit minimum
No minimum daily balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.50% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
Deposit cash at 90,000+ retail locations nationwide
7. Santander Bank
Santander Bank is a regional bank with branch locations in New York, Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, Pennsylvania, and Rhode Island. The free checking account option is Simply Right Checking, which waives the $10 monthly fee as long as you have at least one activity on the account each month. This includes any deposit, withdrawal, transfer, or payment posted to the account within each calendar month.
Fees:
$10 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
$25 opening deposit
No minimum daily balance required
ATMs:
Fee-free at 2,000+ Santander Bank ATMs
$3 fee for out-of-network ATM transactions
Interest on balance:
0.03% APY on savings accounts
Up to 5.50% APY on CDs
Additional perks:
8. HSBC
HSBC isn’t just a national bank. It’s multinational, with locations across the U.S., as well as in Latin America, Europe, Africa, the Middle East, and Asia. This is a bank for high rollers, with a steep fee of $50 monthly if you don’t meet minimum requirements. Those requirements are either a $75,000 balance, monthly direct deposits of at least $5,000, or a residential mortgage loan of at least $500,000.
If you travel internationally, though, HSBC is worth considering since you can use your debit card at any ATM worldwide with no fees. HSBC also rebates up to five U.S. third-party ATM fees each month.
Fees:
$50 monthly fee (waived with requirements)
No overdraft fee
Balance requirements:
No minimum opening deposit
No minimum daily balance required ($5 to earn interest)
ATMs:
Fee-free at 55,000+ Allpoint ATMs nationwide
No fees for out-of-network ATM transactions
Up to five third-party U.S.-based ATM fees rebated monthly
Interest on balance:
0.01% APY on checking
Up to 4.15% APY on savings account
Up to 4.50% APY on CDs
Additional perks:
Unlimited rewards credit cards available
In-app support for international transactions
9. Corning Credit Union
Corning Credit Union membership is open to anyone who lives, works, worships, or attends school in Chemung County or Corning, New York. Membership is also open to residents of select areas in North Carolina, Pennsylvania, and South Carolina. The best thing about Corning Credit union is that its basic checking account earns 3.00% APY.
Fees:
No monthly fee
$32 overdraft fee
Balance requirements:
No minimum daily balance required
ATMs:
Fee-free at Corning Credit Union ATMs
$1 fee for out-of-network ATMs (waived for first four each month)
Interest on balance:
Up to 3.00% APY on checking
Up to 1.00% APY on savings
Up to 4.60% APY on share certificates
Additional perks:
Competitive rates on loans
Wide range of rewards-earning credit cards available
10. Dime Community Bank
If you run a business in the New York City or Long Island area, Dime Community Bank has plenty to offer. Dime’s business checking accounts come with a $12 monthly fee for up to 250 items, but Dime will waive it as long as you have an average daily balance of $10,000 each month.
Small business owners might find this on the high side, but if you have more than 250 items each month, that fee goes up to $25 with a balance requirement of $20,000 to waive it. But if you can meet the minimums, or you don’t mind the fee, you might like the extra services offered to members.
Fees:
$12 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
No minimum opening deposit required
ATMs:
Fee-free at Dime Community Bank ATMs
$1.50 fee for out-of-network ATMs
Interest on balance:
Rates not publicly disclosed
Additional perks:
Wide range of loans that serve small businesses
Access to legal, real estate, and accounting services
11. TD Bank
TD Bank is a national bank with hundreds of branches across New York. Although TD’s checking account comes with a $4.95 monthly fee, everything else is free, including overdrafts. One of this bank’s standout features, though, is its CD rates. Currently, you’ll get 5.00% APY on a six-month CD, with the option to bump up the rate if the market changes.
Fees:
$4.95 monthly fee
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 2,600+ TD Bank ATMs nationwide
$3 fee for out-of-network ATMs
Interest on balance:
Up to 3.51% APY on savings account
Up to 5.00% APY on CDs
Additional perks:
Live 24/7 customer service available online
Same-day replacement for lost debit card
Methodology
If you live in New York, chances are you know there’s no shortage of options. But we strove to create a list that brings together a little of everything. Not every customer wants the biggest bank, but plenty of customers would rather have a larger bank with a robust set of features. We combined small, local banks, credit unions, and large, corporate banks to ensure you can find the best bank for you.
Of course, it’s vital to make sure you’re going with a secure bank. We narrowed our list to those banks that had solid reputations and a history of serving New York residents. Beyond that, we made sure each bank offers savings accounts as well as checking, and we included a few that have features that would appeal to small business owners.
When you’re ready to open a bank account, it’s important to compare banks to make sure you’re getting the best rates. Many banks and credit unions can offer a great banking app and chat support, but you might prefer the personal touch you get with a local bank. Whatever your choice, pay close attention to fees and interest rates to ensure you’re getting the best deal for parking your money.
HSBC is raising mortgage rates for the second time in a week, a move expected to be copied by other lenders that will ramp up the financial pressure on UK households and the political danger for prime minister Rishi Sunak.
Brokers warned that other UK lenders would follow HSBC’s decision on Wednesday, exacerbating the cost of living crisis ahead of an election next year.
Moves to withdraw or reprice mortgage deals have increased in recent weeks as the financial markets react to stubbornly high inflation data, which has changed expectations of how far the Bank of England will have to raise interest rates.
The issue dominated exchanges at prime minister’s questions on Wednesday, with Sunak insisting the government’s “number one priority” was cutting inflation and bearing down on interest rates.
But Sir Keir Starmer, Labour leader, claimed Sunak was distracted by political infighting in the ruling Conservative party at a time when people were worried about “their bills, the cost of the weekly shop and spiralling mortgage rates”.
HSBC, one of the UK’s largest mortgage lenders, said it would withdraw rates for new residential mortgages offered through brokers by 5pm on Wednesday, before announcing new prices on Thursday. Last week the bank wrongfooted mortgage brokers by pulling its deals at short notice before repricing earlier this week.
“Over recent days, cost of funds has increased and, like other banks, we have had to reflect that in our mortgage rates,” it said.
Lenders fear that volatility in swap rate markets — which they use to price their fixed-rate mortgages — will leave them exposed. Adrian Anderson, director at broker Anderson Harris, said he was “confident other [lenders] will follow shortly”.
Andrew Montlake, managing director at broker Coreco, said HSBC was unlikely to be the last lender to raise rates this week. Having withdrawn and repriced its rates to allow it to process a flood of applications, he said “swap rates have moved again and they’re still getting lots of business, so they’ve had to move them up again”.
Simon Gammon, founder and managing partner at broker Knight Frank Finance, said: “They’re nervous about lending at a loss.”
The issue of rising mortgage costs is becoming increasingly political. Fears among Tory MPs about a “mortgage time bomb” contributed to the ousting of Liz Truss as prime minister last year, after her “mini” Budget spooked markets and pushed up interest rates.
Labour is attempting to conflate the Truss economic disaster with the current rise in mortgage rates, suggesting a pattern of Tory economic mismanagement. Sunak insisted the situation now was completely different and the economy was “resilient” and inflation was falling.
Earlier on Wednesday, chancellor Jeremy Hunt said tackling inflation was the “number one challenge” and said the BoE had “no alternative” but to raise interest rates to tackle it. “We have to do everything we can as a government, as a country, to support the Bank of England in their mission to squeeze inflation out of the system. And that is our primary focus.”
On Monday, Santander said it was temporarily withdrawing all of its fixed and tracker mortgages for new borrowers “in light of changing market conditions”. Clydesdale Bank, NatWest and Coventry Building Society were among lenders that raised rates across their home loans portfolio this week.
BM Solutions, a specialist buy-to-let lender that is part of Lloyds Banking Group, said on Wednesday it would withdraw rates across its range on Thursday evening, and return with higher prices from Friday.
The average interest rate on a two-year residential fixed product hit 5.9 per cent on Tuesday, up from 5.26 per cent at the beginning of May, according to finance site Moneyfacts. A year ago, rates on two-year fixed mortgages were averaging 3.25 per cent.
The rise in the cost of borrowing is already being felt by estate agents. “It is not starting to hurt yet,” said Matthew Leonard, director at estate agent Winkworth in Bath, but added that the sales market was “definitely quieter” in recent weeks.
This article has been amended since original publication to clarify that the 5pm Wednesday withdrawal of rates on new HSBC residential mortgages was for those offered via brokers
Here’s everything you need to know about rising mortgage rates and whether they will fall in the future.
Why are mortgages going up?
Rising interest rates mean it costs more to borrow money from banks and other lenders, while people who save money in banks receive more interest for putting their money into accounts.
The Bank of England says it is increasing interest rates to bring inflation down but it takes time to work, usually up to two years.
The idea is that higher interest rates mean less money is being spent in the UK and that brings down the overall spending in the economy and slows price rises down.
As mortgages are a type of credit, they are affected by rising interest rates.
However, not all mortgages are affected. People who have a fixed-rate mortgage will be largely insulated from interest rate rises until the fixed rate comes to an end and a new one needs to be negotiated.
People on tracker mortgages are more susceptible to interest rate rises because they follow the base rates set by the Bank of England.
Many mortgage lenders already put up fixed-rate mortgages for new customers ahead of the interest rate, according to Rightmove’s mortgage expert Matt Smith.
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The property expert said the average interest rate for a five-year fixed 85% mortgage rose from 4.44% to 4.52% ahead of the BoE announcement. That works out at an extra £14 a month for someone purchasing a typical property and spreading the cost over 25 years.
Smith said people on tracker mortgages may be hit harder by the BoE’s decision to raise interest rates.
The Rightmove expert said: “Those on a tracker mortgage will be more disappointed with the news, as they may have thought that the base rate had peaked in March given some of the positive signs for the wider economy, and this is another cost they will need to factor into their monthly budget when the full rate rise is passed on.”
The rise in interest rates has seen the housing market slow down with the number of transactions and mortgage approvals declining in April 2023.
There were 82,120 property transactions in the UK in April, according to HMRC’s seasonally adjusted figures. That represented an 8% drop compared to March while also a quarter down on April 2022.
Mortgage approvals also plunged. There were 48,690 mortgages given the greenlight in the UK in April 2023 according to the Bank of England’s statistics. That figure is 5% lower than in March and more than a quarter lower than a year ago and levels seen between 2018 and 2019.
How high will mortgage rates go in the UK?
It’s impossible to say how high interest rates may go without the aid of a crystal ball but the Bank of England has given some indication of how it expects things to progress in the future.
The central bank has targeted getting inflation down to 2% by the end of 2024 – it is currently at a “higher than expected” 8.7%.
BoE forecasts predict that interest rates will peak at 4.75% at the end of 2023 before falling to around 3.5% by 2025.
But while inflation remains high, there is the possibility of interest rates rising to counteract it and that could mean a 13th consecutive monthly rise might be on the cards in June.
In fact, stubborn inflation rates mean rises could continue for a while yet.
Are mortgage rates coming down in 2023?
With interest rates set to remain high until inflation starts to fall, that could see mortgage rates continue on an upward trajectory.
Rightmove’s Smith said: “Looking ahead, if the Bank of England outlines a positive view on the prospect for inflation and base rates, we could see mortgage rates fall, as they have done after recent base rate decisions. But if the bank is more cautious, we can expect rates to continue their upward trend in the short term.”
However, the bad news for people paying off mortgages is that a lot of the pain could still be to come.
Think tank Resolution Foundation said two-thirds of the eventual £12 billion increase in annual mortgage costs across Britain may still yet to be passed on.
That’s because fixed-rate mortgages have become more popular in recent years – the think tank said fixed-rate deals accounted for £4 out of every £10 spent before the financial crisis but now £9 out of every £10 lent is at a fixed rate.
Mortgages that are at a fixed rate for five years also became the most popular product between 2016 and 2022, overtaking two-year fixed mortgages.
more mortgage pain to come,” said Simon Pittaway, a senior economist at Resolution Foundation.
In fact, inflation figures in April suggested rising interest rates will continue. Inflation in the year up to April was 8.7% and although that was down from the 10.1% recorded in March it was still higher than expected. Financial analysts had reportedly anticipated inflation to fall to 8.2%.
That led to predictions the Bank of England could raise rates to as high as 5.5% in a bid to control inflation.
Kellie Steed, Uswitch’s mortgages expert, said: “While many experts thought that the series of consecutive Bank of England base rate rises were ending, more recent analysis suggests that it will reach 5.5% by the end of the year, with no signs of rates beginning to fall until at least February 2024.
“It’s clear that both recent and anticipated future base rate lifts, as well as increased swap rates, have already been factored into many lender’s rate decisions, with Nationwide, Halifax, Santander, Virgin Money and Atom mortgages all pushing up their fixed rates over the past few days.”
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What support is available if you’re struggling to pay your mortgage?
Rising mortgage payments may not be something that every household can absorb, particularly with the wider cost of living crisis driving up other costs.
If you are struggling to pay your mortgage, the first thing you should do is contact your lender to discuss your options.
If you are receiving universal credit or other benefits, you may be able to get a Support for Mortgage Interest Loan to help you cover rising interest payments. This is from the Department for Work and Pensions (DWP) and you have to repay the loan when you sell the property.
Additional support is available in Scotland through the Home Owners’ Support Fund. This is based on two schemes – the Mortgage to Shared Equity scheme will see the Scottish Government buy a stake in a property to reduce the loan while the Mortgage to Rent scheme allows a social landlord to buy a property and rent it back.
Around one in seven mortgage holders who seek help from StepChange are in arrears on their mortgage, the debt charity said.
“The situation is becoming increasingly precarious for many people and widespread problem debt is a risk, particularly for financially vulnerable households,” said Vikki Brownridge, chief executive of StepChange in a call for firms to be “proactive” in supporting people who are struggling to pay.
“For anyone worried about housing costs and their ability to cover payments, it’s important to reach out for help as early as possible, whether that’s through contacting their lender, or a free debt advice charity like StepChange.”
If you are struggling to pay, support from StepChange and other debt charities is available or you can call the National Debtline on 0808 808 4000 or contact Citizens Advice for advice.
Do you have a story to tell or opinions to share about this? We want to hear from you. Get in touch and tell us more.
Banks have been shortchanging customers for nearly a year with the average mortgage rates exceeding savings rates by over three per cent since last July.
According to data from Moneyfacts, at the end of last week the average rate on offer for a two year mortgage was 5.87. The average rate on a savings account was just 2.27 per cent.
MPs pile pressure on banks as savings offers lag interest rate hikes
The data demonstrates how banks continue to offer low rates to customers despite pressure from both politicians and regulators.
At a recent Treasury committee hearing, Andrew Bailey, governor of the Bank of England, admitted that the pass through had been “unusually weak”.
The low rates on offer, particularly at the major high street lenders, has attracted cross-party criticism, with the influential Treasury committee demanding that banks “up their game” on savings rates.
Andrea Leadsom, a Conservative MP who sits on the committee, told City AM “its quite clear banks have failed to pass on the rise in interest rates to savers. They’ve only passed them on as fast as could be to borrowers, and therein lies the problem.”
She noted that at a time when the banking sector is fundamentally strong, according to regulators, banks have “the opportunity to actually do the right thing”.
Labour MP Angela Eagle, who also sits on the Treasury committee, told City AM “we’ve all noticed the disparity between the speed with which the costs of higher interest rates are heaped on borrowers and how slowly any of it is shared with savers.”
Eagle highlighted the bumper profits banks have made this year as they’ve benefited from higher interest income. “You don’t have to be a genius to work out what’s going on,” she said.
Nationwide, Santander, TSB and Virgin Money probed over ‘measly’ savings rates
Although politicians across the political spectrum agree that banks need to do more, there is disagreement about the proper response. Leadsom argued that the “root cause is customer inertia”.
She suggested that if banks were required to inform their customers whether there were better deals on the market and if it was easier to move accounts “without friction”, then things might improve.
Recent research from Atom Bank showed that half the adults in the UK have never switched savings provider, even though three quarters say they would switch to a better rate.
Their research suggested savers could receive more than £200 per year by switching to better deals.
Eagle however suggested people cannot “shop around” that much as its “awkward, time consuming and quite a lot of information you get can be quite misleading”.
Stressing this was not Labour policy, Eagle suggested banks could be forced to match the rate they receive at the Bank of England. “You’ve just got to have something that allows savers to settle on something and be treated fairly without having to spend half their life trawling around websites,” she said.
Many have suggested that the incoming Consumer Duty, the Financial Conduct Authority’s flagship regulatory measure, will force banks to improve. The Duty imposes a requirement to deliver good outcomes for consumers.
A spokesperson for UK Finance, the country’s leading bank lobby, said: “The rates an individual firm offers on its savings and lending products are driven by a number of different factors, not just the Bank of England’s Bank Rate. Saving and lending rates aren’t directly linked to one another and will therefore move at different times and by different amounts. For savings products one key factor that impacts the rate is whether someone wants instant access or can deposit their money for a longer period of time.”
The spokesperson added that the market is “competitive” and encourage customers “to shop around for the product best suited to their needs.”
Mortgage rates rocket but savings rates barely move after May’s inflation shock
Several market experts discussed these topics during the Mortgage Bankers Association (MBA) Secondary and Capital Markets Conference and Expo 2023 in New York.
The buyers’ side
Steven Abrahams, a senior managing director at Amherst Pierpont Securities, a broker-dealer owned by Santander, said that before the Global Financial Crisis, the market was dominated by investment portfolios looking for the risk and return of MBS assets.
However, after the crisis, the Fed entered the MBS market, and new regulations encouraged banks to hold quality liquid assets, including MBS.
“What we’re looking at now is the initial phase of exit of those two policy investors and the return of the market to marginal pricing by portfolios that are in the game basically to make money,” Abrahams explained. “That’s the easiest way to think about why spreads have widened the way they have.”
Byron Boston, CEO and co-chief investment officer at Dynex Capital, Inc., said that “levered returns are very attractive today” and there’s a “huge demand for income,” which will keep MBS attractive to money managers.
“A 30-year fixed rate mortgage is an unusual beast,” Boston said. “But because our government is involved with it, all of us as American citizens have the pleasure of having it.”
The sellers’ side
As affordability is still an issue, originations will decline and affect the supply of MBS, panelists said. The MBA estimates that volumes will decline from the $4 trillion level in 2020 and 2021 to less than $1.8 trillion this year.
According to Jeana Curro, head of agency MBS research at Bank of America, mortgage rates are still very high and people that have walked into very low mortgage rates during the pandemic “are kind of stuck in their homes.”
“We’re forecasting about $268 billion a year in [MBS] net issuance. Last year, it was about $535 billion,” Curro said.
The secondary market experts have not seen any disruptions caused by the sale of MBS securities once held by banks that collapsed.
The Federal Deposit Insurance Corporation(FDIC) decided in early April to sell the $114 billion in MBS it retained after seizing control of failed regional banks Signature Bank and Silicon Valley Bank (SVB). BlackRock Financial Market Advisory has led the sales process.
Curro said that BlackRock has been smart in its executing a strategy that keep the size of offerings low and consistent while also actively communicating with the market.
“The bigger disruption that you want to be concerned about, beyond the mortgage market, is that we’re doing this within a global system that has an enormous amount of risk attached to it,” Boston said. “If you have another risk event that takes place on top of this – while we’re trying to clear the market of the banking problem – now we have a bigger issue.”
Boston added: “These are really good assets. It’s just a matter of what price ultimately will come about.”
Regarding the Fed’s MBS portfolio, Curro said that “We think what’s more likely to happen, and this is the Bank of America economist’s view, is that by the end of the first quarter of 2024, QT [quantitative tightening] is going to end and at that point, what they’re likely to do is take the mortgage pay downs and reinvest them into Treasuries.”