What Now For UK Mortgage Rates?

In UK News


The Bank of England raised interest rates in September from 1.75% to 2.25%. The 0.5 percentage point increase marks the seventh rise since December 2021 when Bank rate stood at just 0.1%. It also puts Bank rate at its highest level for 14 years.

But sterling volatility and market uncertainty as well as interest rises is pushing up the cost of mortgages. Major lenders including NatWest, Barclays, Halifax and Virgin Money have pulled deals and brought them back to the market at higher prices.

According to data provider Moneyfacts, the average cost of two- and five-year fixed rate mortgages across all deposit levels yesterday stood 6.11% and 6.02% respectively. Average rates for these deals were last above 6% in 2008 for two-year and 2010 for five-year fixes.

The average number of mortgage deals available is now 2,430 – less than half the number recorded by Moneyfacts in December 2021 before interest rates began to rise.

But, with mortgage rates changing on a daily basis, it’s important to keep calm and objective. Moneyfacts says that many of the mortgage withdrawals from lenders are temporary amid the current uncertainty.

Find out more on How To Ride Out The Mortgage Storm.

Interest rates, mortgages…

So what do climbing interest rates mean for the cost of mortgages so far?

The estimated two million homeowners on variable rate deals, such as base rate trackers, will see an almost immediate rise in their monthly repayments following the recent Bank rate rise to 2.25%. As an example, a tracker rate rising from 3.5% to 4% will cost almost an extra £60 a month on a £200,000 loan.

Remortgagers and first-time buyers will also be faced with much higher mortgage costs when they come to source a deal – as set out above – with the cost of new fixed rates having already factored the latest rise into the price.

You can work out the monthly cost of a mortgage against various interest rates with our Mortgage Calculator.

… house prices and Stamp Duty

As well as more expensive mortgages, those looking to buy or move home are grappling property prices that are 9.9% higher than 12 months ago, according to Halifax. Its latest house price report, published today, puts the average cost of a property in September at £293,835.

However, September also marks the third consecutive month that house price inflation has fallen – from a high of 12.5% in June – and does not reflect the recent political and market turbulence. Continued hikes in borrowing costs are also expected to weaken growth in the housing market.

Stamp Duty cuts announced in last month’s Mini Budget – which raised the nil-rate band on the purchase of a property from £125,000 to £250,000 – means that a third (33%) of all homes listed on Rightmove are also now exempt from the tax.

Fixed rate mortgages

Many mortgage borrowers are opting for longer-term fixes in a bid for stability as interest rates climd and the economic outlook remains uncertain.

But while, historically, borrowers would pay more to fix in for longer, the price gap is closing.

The difference in average cost is now less than 0.10 percentage points between a two- and five-year fix, according to Moneyfacts.

Why are interest rates rising?

The Bank of England’s Monetary Policy Committee (MPC) uses interest hikes as a means of cooling the economy and taming rising inflation. The Consumer Prices Index (CPI) measure of inflation already stands at a heady 9.9% in the 12 months to August against a government target of 2%.

If inflation continues to rise, some forecasters are suggesting that Bank rate could reach 6% by next year.

The Bank’s MPC is scheduled to next meet on 3 November to decide on interest rates.

One of the main longer-term drivers behind rising inflation is the cost of energy. The government has intervened by replacing the energy price cap – which had been due to send energy prices soaring to over £3,500 a year from 1 October – with a cheaper Energy Price Guarantee.

This will limit the cost of typical-use household bills to £2,500 a year for two years, with an additional £400 automatic discount applied to electricity bills for every household between October 2022 and March 2023.

What are today’s mortgage rates?

With upwardly-mobile Bank and inflation rates, keeping track of mortgage costs is challenging – especially now when rates change, and deals can be pulled, on a daily basis.

One simple way is use our mortgage tables, powered by online mortgage broker, Trussle.

To find out what deals are available at today’s rates for the kind of mortgage you’re after, you’ll need to enter your personal criteria into the table below. Here’s what to do:

  • Select whether the mortgage is to fund a house purchase or if it’s a remortgage for an existing property
  • Enter the property value and the mortgage amount you require. This will automatically generate a percentage which is known as your ‘loan to value’. The lower your loan to value, the cheaper the mortgage rates available
  • Tick the relevant box if it’s a buy-to-let or interest-only mortgage (you’ll need a repayment strategy in place for these deals), or if you’re looking for a mortgage to fund a shared ownership property
  • Finally, filter your search by the type of mortgage you want, for example a two- or five-year fix or tracker. The filter is set to a complete mortgage term of 25 years but you can change this if required.

Here’s a live table of the mortgage deals available today.

What else do I need to know?

Mortgage deals offering the cheapest rates usually come with fees attached. You can opt to pay these upfront or add them to the loan. To factor in the cost of the fee, order your the results by ‘initial period cost’ (in the ‘Sorted by’ dropdown).

Alternatively, you can order results by initial rate, lowest fee or monthly repayment – even by the lender’s ‘follow on’ rate that the deal will revert to at the end of the term.

While mortgage rates change daily, the very cheapest are reserved for bigger deposit amounts, usually of 60% of the property value or more. And, in all cases, you will need a sufficient income and clean credit history to be accepted for a mortgage.

If you want to see what your monthly mortgage payments might look like in different scenarios while overlaid with household bills, our Mortgage Calculator will crunch the numbers.

When can I start a remortgage?

Once issued, mortgage offers tend to be valid for six months. If you are looking to remortgage your current home, this means you can lock in a rate you see today – at no cost and with no strings attached.


Read More: What Now For UK Mortgage Rates?

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