The state pension will offer secure income up to a certain level but if you need more, and you don’t have something like a defined benefit pension scheme, then annuities are an important option.Ĥd ago 08.10 BST Rishi Sunak says no extra help for homeowners struggling with their mortgage Though they have dropped in popularity in recent years annuities should always be considered where there is a need for guaranteed income in a retirement strategy. With more increases rumoured to be on the way we could see further income boosts in the coming months. Interest rates are one factor that determine annuity rates and while it is by no means a certainty, we have seen annuity incomes increase in line with interest rate rises over the past two years. This increase is likely to be in response to the looming rate rise we are expecting this week. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says:Īfter being relegated to the side lines after Freedom and Choice annuities are once again taking centre stage and attracting more notice. The last time incomes were this high was November 2022, after the mini-budget chaos drove up the cost of government borrowing (meaning UK bonds paid a higher return). They report that a 65-year-old with a £100,000 pension is able to get up to £7,144 per year, up from £7,027 two weeks ago, and an increase of a fifth on the same period last year. The average rate on an annuity, which provides a regular guaranteed income in retirement, has jumped by 20% over the last 12 months, according to financial services group Hargreaves Lansdown. This reflects financial market expectations that the Bank of England will raise interest rates several times this year.Īs well as a quarter-point hike on Thursday, to 4.75%, the money markets predict rates could hit 5.75% by the end of the year.Īlthough rising interest rates are a blow to borrowers, they are welcome news for those retiring. Longer-term fixed rate mortgages also become more expensive, with the average five-year fixed rate rising to 5.67% today, from 5.62% on Friday. This is the first time since the first week of December 2022 that two-year fixed-rate mortgages have cost 6% or more. It takes average two-year fixed mortgage rates back towards the levels seen in the chaos after the mini-budget last autumn ( when they hit 14-year highs). That’s up from 5.98% on Friday, and 5.26% at the start of May. Newsflash: the average rate on a two-year fixed rate mortgage has risen over 6%, for the first time in six months.įinancial information provider Moneyfacts reports that the average two-year fixed rate has increased to 6.01% today. 4d ago 08.42 BST Average two-year fixed mortgage rates hit 6%, first time this year
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