What’s Next for UK Mortgage Rates?

The Bank of England raised interest rates from 2.25% to 3.0% on November 3rd. The 0.75-point rise is the eighth rise since December 2021, when bank rates were just 0.1%. Bank rates are at their highest level since November 2008.

Volatility and uncertainty

Mortgage costs were already rising due to pound volatility. market uncertainty, after recent political turmoil and rising bank rates. Major lenders including NatWest, Barclays, Halifax and Virgin Money all withdrew deals and returned to the market at higher prices.

The appointment of Rishi Sunak as the new prime minister has helped stabilize the market, and the average cost of fixed-rate mortgages has gradually fallen from its peak.

According to data provider Moneyfacts.co.uk, today (7 November) the average cost of a 2-year and 5-year fixed interest rate deal across all deposit levels is 6.42% and 6.24% respectively. This compares to 6.65% and 6.51% on October 20th. However, the last time interest rates were close to current levels was in 2008.

The average number of mortgage transactions available was 3,240. The number has continued to rise since dropping to around 2,560 earlier this month, but compared to 5,300 recorded by Moneyfacts in December 2021, before interest rates started rising.

With mortgage rates changing rapidly, it’s important to remain calm and objective. It remains to be seen whether the stable political climate following last month’s disastrous mini-budget under then-Prime Minister Liz Truss will help restore further stability.

If so, this could ease the pressure on the Bank of England to raise interest rates.

The next decision by the bank’s Monetary Policy Committee (MPC) will be taken on December 15th.

In the meantime, for more information, How to survive the mortgage storm.

interest rates and mortgages

So what does rising interest rates mean? mortgage cost So far?

An estimated 2 million homeowners on floating rate deals like Basic rate tracker, after the recent rise in bank interest rates to 3.0%, monthly repayments would rise almost immediately. For example, if Tracker’s interest rate rises from his 3.5% to 4.25%, a £200,000 loan will cost him about £80 extra per month.

A person with a £250,000 mortgage over 25 years at Moneyfacts’ average two-year fixed interest rate of 6.46% would see their monthly payments increase from £1,520 to £1,643.

Re-mortgages and first-time buyers will face much higher mortgage costs when they start trading, with the cost of new fixed rates already factoring in recent price increases, as mentioned earlier. will be

You can calculate monthly mortgage costs for various interest rates. mortgage calculator.

House prices and stamp duty

Similar to higher mortgages, people looking to buy or move homes are grappling with asking prices that are 8.3% higher than they were 12 months ago, according to Halifax. According to the latest report (issued 7 November), the average price of a property on the market in October is £292,598.

However, the annual inflation rate has eased from 9.8% in September, and there are also reports of signs of a slowdown in the market.

A continued rise in borrowing costs is expected to further dampen growth. A new report from the Royal Institute of Chartered Surveyors (RICS) shows that agreed home sales fell for the fifth month in a row in September. The -27% figure marks the biggest monthly drop since May 2020, when markets shut down due to Covid.

Stamp duty cuts announced in September’s unfortunate news mini budget This raises the duty-free threshold for property purchases from £125,000 to £250,000. This means that his one-third (33%) of all homes listed on Rightmove are exempt from taxes. Other tax incentives announced under former Prime Minister Liz Truss have been turned around, but this one will remain.

Why are interest rates rising?

Banks’ MPCs are using rate hikes as a way to cool the economy and curb rising inflation. The consumer price index (CPI) inflation indicator has already reached 10.1% in the 12 months to September, against the government’s target of 2%.

Some experts predict that bank rates could reach 6% by next year if inflation continues to rise.

One of the main long-term factors behind rising inflation is the cost of energy. the government intervened energy price cap – This was due to see prices skyrocket to £3,500 per annum from October 1st, but the Energy Price Guarantee (EPG) is now cheaper.

EPG limits energy costs on a typical household bill to £2,500 per year.

However, while the scheme was originally scheduled to run for two years, President Jeremy Hunt has confirmed it will end in April 2023.

The additional automatic £400 discount on electricity per household from October 2022 to March 2023 will continue to apply.

What Mortgage Transactions Are Available?

With banks and inflation on the rise, it’s becoming increasingly difficult to track mortgage costs.

One easy way is to use a mortgage table powered by online mortgage broker Trussle.

To find deals available at today’s interest rates for the type of mortgage you’re seeking, you’ll need to enter your personal criteria in the table below.

  • Choose with or without mortgage house purchase funds or it is home loan refinancing For existing properties
  • Enter property value and the Mortgage amount you need This automatically generates a percentage called ‘loan to value’.The lower the value of the loan, the cheaper the mortgage interest rate available
  • If applicable, please check the appropriate box Rent or Interest Only Mortgage (These deals require a repayment strategy), or if you’re looking for a mortgage shared ownership property
  • Finally, filter your search by: type of mortgage For example, you need a 2-year or 5-year fix or tracker. The filter is he is set to 25 full mortgage terms, but you can change this if you want.

This is a live table of mortgage deals available today.

What else do you need to know?

Mortgage deals that offer the lowest interest rates usually come with a fee. You can choose to pay these up front or add them to your loan. To account for the cost of fees, sort the results by “initial cost” ([並べ替え]dropdown).

Alternatively, you can order results by initial interest rate, minimum fee, or monthly repayment amount. You can also place an order with the lender’s “follow-on” rate at which the transaction will be reversed at the end of the period.

The cheapest are usually reserved for high deposits of 60% or more of the property value.And in any case, enough income and clean credit history Accept a mortgage.

If you want to see what your monthly mortgage payments look like in different scenarios, overlaid with your household bill, mortgage calculator Crush the numbers.

When can you start refinancing your home loan?

Once issued, mortgage offers are generally valid for six months. If you’re looking to remortgage your current home, this means you can lock in your current interest rate for free.


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