When the Bank of England’s Monetary Policy Committee raised the base rate by 0.75 percent to 3 percent earlier this month, the reaction was muted.
Some expected mortgage rates to rise in the wake of the decision, as both banks have raised their base interest rate eight times since December 2021.
But while tracked mortgage rates have increased as rates have risen, flat rates have continued to fall from the highs they reached after September’s infamous mini-budget.
Lenders including Platform, Yorkshire Building Society, HSBC, Halifax, Lloyds and NatWest have cut their fixed rates in the past week.
The two-year repair average, which peaked at 6.65 percent on Oct. 20, according to Moneyfacts, now stands at 6.28 percent (November 14) while the five-year fix, which peaked at 6.51 percent, now sits at 6.07. percent. cent.
Fixed rate mortgages have been declining since last month after they had risen sharply
This is partly because gold bond yields, which dictate the cost of government borrowing and influence mortgage rates, have fallen to pre-mini-budget levels.
Moreover, market predictions of how interest rates will rise next year have fallen sharply, with most expecting the benchmark interest rate to peak at 4.5 percent, 1.5 percent lower than expected in the wake of September’s ominous mini-budget. ).
Therefore, some mortgage brokers expect that fixed five-year mortgage rates will drop to less than 4 percent in the new year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘The fixed-rate mortgage rate has been declining over the past few weeks, and if this continues, we expect five-year reforms of less than 4 per cent by early 2023.
With lenders reporting that volume and activity are declining thanks to higher rates, we expect this trend to continue.
This desire for a pipeline and lower cost of money will motivate lenders to lower interest rates further, which will be welcome news for hard-pressed borrowers.
Where are the prices now?
After the September mini-budget introduced by the then Finance Minister Kwasi Kwarting, gold yields rose, driving up the cost of borrowing for banks.
In response, lenders raised their mortgage rates, ensuring that they did not default due to the sharp increase in the cost of credit by passing it on to their customers.
Before the Friday, Sept. 23 mini budget, the average two-year fixed interest rate across all loan-to-value categories was 4.74 percent, and the five-year fix was 4.75 percent, according to Moneyfacts.
The rates now stand at 6.28 percent and 6.07 percent respectively, having both fallen since the base rate announcement on November 3.
The consensus is that fixed rates are falling, despite the BoE’s increase, because lenders have already priced in future increases.
Chris Skies, technical director at Mortgage Brokers Private Finance, said: ‘We hope that this trend of fixed rate pricing will put some borrowers’ minds at ease, as this activity from lenders suggests that some level of prime rate increase is already factored into the market. Fixed rate mortgage pricing.
Where are the mortgage rates now?
According to Moneyfacts, the average two-year fixed deal rate is now 6.28 percent.
For a £200,000 mortgage, that would mean the monthly payments would be £1,323, down £49 from 1 November when the rate was 6.47 per cent.
There was a similar trend in five-year fixed-price deals. The average rate has fallen 0.25 per cent since the start of the month to 6.07 per cent, saving £31 a month on a £200,000 mortgage.
This month, Platform, the mortgage arm of the Co-operative Bank, released new mortgage rates with several fixing five-year rates of less than 5 per cent.
And they are not the only ones cutting rates. The Yorkshire Building Society has slashed its prices by up to 0.38 per cent, and is now 5.34 per cent cheaper on a two-year fixed deal.
HSBC cut interest rates by as much as 0.29 percent, citing the lower cost of borrowing as the reason behind the decision.
Virgin Money has also lowered its prices. The most significant cut was the five-year fixed interest rate with a deposit of 15 percent, which was reduced by 0.34 percent to 5.29 percent.
Bank of England Governor Andrew Bailey said the next rate hike is unlikely to be as high as the market has set its price and mortgage rates must be settled.
The best deal for buying a home on the market right now is a five-year fixed rate of 5.19 percent, according to the latest DevAto data. For low deposit mortgages, Best Offer has dropped significantly in the past few days.
On November 9, the best two-year fixed deal on a 5 percent deposit was 6.24 percent, and by November 11 it had fallen to 5.99 percent.
On the £200,000 mortgage, lowering the rate lowers the monthly payment from £1,318 to £1,287, saving £31 a month.
If borrowers are willing to take a long-term fix in order to secure a lower rate, First Direct offers a 10-year fixed rate mortgage at 75 percent loan-to-value for 5.04 percent.
However, despite lower interest rates, lenders are re-evaluating the affordability calculations, with inflation still in double digits at 10.1 percent in September.
With the cost of living rising, they may decide to put tighter limits on the income they need from borrowers to make sure they can pay their installments.
You can check the best buying schedules and the best mortgage rates for your circumstances with our London & Country powered mortgage finder – and find out what you’ll actually pay with the new and improved mortgage calculator.
Where will prices go next?
Swap rates — the contract under which lenders swap fixed-rate payments for a variable rate to offset fixed-rate risk — have eased in recent weeks, suggesting that lenders have softened their view of future rate hikes.
Incredible bond yields, which affect the cost of mortgage lending, have also fallen, but mortgage rates haven’t fallen so quickly.
Added to this is that there is still a lot of uncertainty in the market. These include the Chancellor’s Autumn Financial Statement on November 17 and the possibility of another rate hike at the Bank of England when the Monetary Policy Committee meets on December 15.
However, there is an emerging view that mortgage rates will continue to fall, at least for the time being.
In his press conference after the base rate was announced, BoE Governor Andrew Bailey said the next rate hike was likely to be as high as the market rate was already, adding ‘this is important because, for example, it means that rates on new term mortgages are not They should go up as they did.
‘As money markets have improved over the past few weeks, this means that the cost of money has also come down, and those savings are now being passed on to mortgage holders,’ said Justin Moye, managing director of brokerage EHF Mortgages.
There will be more changes by other High Street lenders, but we expect market stabilization, price stability over the next few months, and in a “semi-cartel” fashion, most lenders will have similar products so the lender isn’t taking too many applications.
Craig Fish, founder and director of Lodestone Mortgages & Protection, says that while rates are starting to fall, the pace of change is “slower than brokers would like it to be.”
He said: “As expected, lenders have begun to reduce their rates, and I strongly believe they will continue to do so, as we are beginning to see the beginnings of a rate war between lenders.
Lenders often change rates to manage workloads, so while this may be partly to blame, it may also be that many lenders have met their lending targets around the end of the year and are therefore not looking to do more business. I expect to see a very positive start to next year.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their existing fixed-rate deal is coming to an end, or because they’ve agreed to buy a home, are urged to act but not panic..
Banks and building societies are still lending and mortgages are still being accepted with applications accepted.
However, rates change quickly, and there is no guarantee that deals will stick and won’t be replaced by mortgages that charge higher rates.
This is Money’s best mortgage rate calculator powered by L&C that can show you deals that match the value of your mortgage and property.
What if I need to re-travel?
Borrowers should compare rates, talk to a mortgage broker, and be prepared to work to secure a rate.
Anyone with a fixed-rate deal that expires within the next six to nine months should consider how much a remortgage will cost now — and consider a new deal.
Most mortgage deals allow a fee to be added to the loan and then only charged when you take it out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I’m buying a house?
Those who have agreed to buy homes should also aim to lock in prices as early as possible, so they know exactly what their monthly payments will be.
Homebuyers should beware of overexerting themselves and be prepared for the possibility of home prices falling from their current high levels, due to high mortgage rates limiting people’s ability to borrow.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.
You can use our best mortgage rates calculator to show matching deals for your home value, mortgage size, term needs and flat rates.
Be aware that rates can change quickly, so the advice is that if you need a mortgage to compare rates then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check out the best fixed rate mortgages you can apply for
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