When will mortgage rates go down?

For the first time since November 2021, the Monetary Policy Committee (MPC) at the Bank of England chose not to raise interest rates when they met last week. The decision to leave the base rate at 5.25% will have come as a huge relief to many mortgage holders who have seen their mortgage rates spike to over 6% following the disastrous mini-budget last September introduced by then Prime Minister Liz Truss.

So have mortgages rates peaked? Should we expect to see mortgage rates coming down?

“Before the announcement to freeze the base rate last week we had already seen high street lenders such as HSBC, Nationwide and Barclays start to reduce their individual rates.” explains Caroline, Mortgage Adviser at our Barrow branch.

This has largely been driven by significant falls in inflation and the expectation that it will reduce down to 5% by the end of this year and reach the Government’s inflation target of 2% by the start of 2025.

The increased competition in mortgage rates is also fuelled by over 1.8 million fixed rate deals expiring in 2023.

“Many homeowners rushed to lower their monthly payments as we went into lockdown, explains Lyn, Mortgage Adviser at our Kendal Office.

“This alongside an increase in property sales fuelled by low stamp duty rates means 2023 was set to see the most mortgage renewals for a number for years. As the cost of living crisis has reduced the number of new mortgage applications, high street lenders need to be competitive with their rates to ensure they can win a share of this remortgage market.”

After the announcement to freeze the base rate lender Nationwide immediately dropped their mortgage rates by up to 0.4% and offered the cheapest five year deal on the market at 4.94%.

The projection for the long term rate of inflation means that some lenders are unusually offering lower interest rates on their five year deals then they are on their two year product fixes. However, a recent article in The Guardian highlights that many borrowers are choosing higher rated two year deals for fear of ‘being left high and dry’ if rates go down.

“Ultimately it’s an individual decision”, explains Vicky, our Barrow Mortgage Adviser. “We’ve seen mortgage rates well over 6% this year and are starting to see more rates closer to and under 5% for the longer fixes.”

“It’s been a challenging year for mortgage holders and first time buyers looking to get on the property ladder. Rates are falling, but for those wanting to protect themselves against future base rate rises and higher mortgage payments, the lowest rates are not always the best option”.

Poole Townsend are independent mortgage brokers so we can not only compare different lenders and length of fixed deal but also variable rates and tracker mortgages allowing customers to choose which is right for them.

If your mortgage deal is expiring within the next 6 months, get in touch with Caroline, Lyn and Vicky who can support you to choose the best deal for your circumstances.

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