We know that buyers have had a nervous time of late. As interest rates have climbed, so too have mortgage rates. This has meant extra expense if you are looking to buy, as well as for those wanting to remortgage. If this is you, it may have even put you off for the moment. You may be waiting until the market settles and rates begin to fall again.
When you look at the figures, it’s not surprising that buyers are cautious. In 2015, the average two-year fixed rate was below 2% and a five-year deal was less than 3%. By Autumn 2021, it was even lower, at 1.2% for a two-year fixed deal and 1.3% for a five-year fixed mortgage. Rates spiked at 6% in November 2022, and since then have yo-yoed as the base rate has increased, sitting at above 6% for much of the summer.
But there is light at the end of the tunnel. Could that trend be at an end? In September, for the first time in 15 months, the Bank of England kept interest rates at the same level. And current rates are still a lot lower than the rate of 13% or over which some home-owners were paying in the 1980s.
Although they remain at a high of 5.25%, there had been some concern that they would rise to 5.5%. The static figure has provided some comfort and even led to predictions that rates will now start to fall, especially as inflation fell in August. Hope that the market may have reached peak interest rates brings hope we have also hit peak mortgage rates.
Are Mortgage Rates Now Changing?
Some lenders had already begun to cut mortgage rates to drive confidence in the market even before the interest rate announcement. These included HSBC in July, as well as Nationwide, Barclays and Virgin Money in August.
At the end of September, a week after the interest rate update, Moneyfacts revealed that a typical five-year fixed residential mortgage was now available at a rate of 5.99% – its lowest rate in nearly three months, while a fixed two-year deal was 6.5%. This followed rate cuts from the likes of Halifax, Barclays, Santander and Clydesdale Bank.
Lenders have also created five-year fixed-rate deals at below the 5% threshold to try to help buyers, though many of these are dependent on large deposits or high fees. The latest of these, announced at the beginning of October, includes a 4.89% fixed rate five-year deal from TSB available with a 40% deposit and £995 fee. Meanwhile, Virgin Money has a 4.82% five-year deal with a £1,295 fee but which is only available through mortgage brokers.
What Will Happen Next?
Although these have initially only been slight reductions, a stable rate, or even a fall in interest rates, should put further downward pressure on mortgage rates and could see cuts from a wider range of mortgage suppliers.
Should I Think About Moving Or Wait For Further Cuts?
It cannot be denied asking prices have been reduced in order to be realistic to the change in the market and achieve a sale. This means you may get more for your money despite the higher mortgage rate.
This has had a big impact with average house prices more than £14,500 lower than a year ago. The dilemma for potential buyers is that, as interest rates and therefore mortgage rates, begin to fall, then house prices could rise again.
The Future
Although another interest rate rise isn’t off the cards later this month, the consensus seems to be that it will be held steady once again. Lenders also need to continue to stimulate market demand so we could see further mortgage rate cuts to drive business.
The next inflation update, and subsequent interest rate update, will provide a clearer focus over the coming weeks as to where rates might go next, but the market is certainly hoping we’ve seen the worst of the peaks. And that is encouraging news if you are ready to buy.
Proctors is an independent network of individual estate agent businesses with branches in Beckenham, Bromley, Park Langley, Petts Wood, Shirley and West Wickham. We’ve been buying, selling and letting in these areas since 1946 and so have seen our customers through many a mortgage rate rise and fall. Get in touch to find out how we can help you.