What future for UK mortgage rates? – Forbes UK Advisor
The ever-tightening cost-of-living crisis and soaring inflation – which stood at a staggering 9.4% in the 12 months to June – are fueling the likelihood of further interest rate hikes this year, putting further pressure on the monthly budgets of millions of mortgage borrowers. British owners.
What’s going on with UK interest rates?
The Bank of England raised interest rates to 1.25% on June 16. It was the fifth hike since December 2021, when the Bank Rate was just 0.1%, and will add around £312 a year to the cost of a £200,000 mortgage (floating rate from 2.50%).
The next interest rate decision will be August 4, when the Bank may well decide to raise rates again in pursuit of the fight against inflation, which shows few signs of waning.
Existing mortgages tied to bank rates, such as base rate trackers, reflect interest rate hikes, while the cost of many new fixed rate transactions have already priced them in.
In addition to rising mortgage rates, those looking to buy or move are also facing asking prices that are on average 13% higher than just 12 months ago, according to the latest house price report. from Halifax.
However, this index and all other house price indices point to a broader slowdown in growth due, in part, to more balanced supply and demand. There were 13% more sellers in June this year than 12 months ago, according to data from Rightmove, while demand for homes is expected to slow in the face of rising costs of living.
Fixed rate mortgages
A growing number of homeowners are now opting for longer term fixed mortgages in a bid for stability. But while borrowers have historically paid more to stay longer, this price gap is narrowing and, in some circumstances, has completely disappeared.
For example, according to Rightmove, the average interest rate on a 75% fixed rate mortgage is now 2.9%, whether it’s a two- or five-year term.
You can find more mortgage news on our mortgage updates page. And refer to our mortgage tables below for the offers available today based on your deposit level and situation.
Why are interest rates rising?
The Bank of England’s Monetary Policy Committee (MPC) is using interest hikes as a tool to cool the economy and bring soaring inflation under control. And the consumer price index (CPI) measure of inflation jumped 9.4% in the 12 months to June 2022, marking its highest level in 40 years.
It reflects both the uncertainty surrounding the Russian invasion of Ukraine, as well as the ceiling for UK energy prices which soared 54% in April to £1,971 and will climb again to the next. ‘fall.
What are today’s mortgage rates?
With a frequently moving bank rate and inflation rate, it is difficult to keep track of mortgage costs, especially since they can change daily. An easy way is to use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.
To find out which offers are available at the current rates for the type of mortgage you are looking for, you will need to enter your personal criteria in the table below. Here’s what to do:
- Indicate whether the mortgage must finance the purchase of a house or if it’s a mortgage for an existing property
- Enter the property value and the mortgage amount you need. This will automatically generate a percentage which is known as your ‘loan to value’. The lower the value of your loan, the lower the mortgage rates available
- Check the appropriate box if this is a purchase for lease or interest-only mortgage (you will need a repayment strategy in place for these transactions), or if you are looking for a mortgage to fund a shared ownership property
- Finally, filter your search by type of mortgage you want, for example a patch or a tracker of two or five years. The filter is set to a full mortgage term of 25 years, but you can change it if needed.
What else should I know?
The mortgage offers offering the cheapest rates usually come with fees. You can choose to pay them upfront or add them to the loan. To account for the cost of fees, sort your results by “initial period cost” (in the “Sorted by” drop-down menu).
Alternatively, you can sort the results by initial rate, lowest fee, or monthly repayment – even by lender’s trailing rate the deal will revert to at the end of the term.
While mortgage rates change daily, the cheapest are reserved for larger deposits, typically 60% of the property’s value or more. And in any case, you will need sufficient income and a clean credit history to be accepted for a mortgage loan.
If you want to see what your monthly mortgage payments might look like under different scenarios while stacked against household bills, our mortgage calculator will do the sums.
While Trussle lists around 12,000 mortgage deals from 90 lenders – representing the vast majority of the market – some deals are sometimes available exclusively through a handful of brokers, so you might not see them.
When can I start a mortgage?
Mortgage offers from major lenders tend to last six months (as noted in our Best Lenders for Remortgage), although some lenders cap expiration dates at three months. If you’re looking to remortgage your current home, that means you can lock in a rate you see today – free of charge and with no strings attached.