What’s Happening with Mortgage Interest Rates?

Mortgage rates are a pivotal factor in the housing market, and have a real impact on the ambitions of homeowners and first-time buyers. Fluctuating between highs and lows, they influence affordability, housing demand, and economic trends. Understanding how mortgage rates work gives borrowers and investors alike the knowledge that they need to navigate the ever-changing landscape of home financing. 

Rising and falling mortgage interest rates aren’t a new phenomena. Mortgage interest rates rose to as high as 19% during the 1980s, and as low as an average of 3.59% in September 2021.

mortgage interest prediction

In January we published a blog “What’s in Store for the Mortgage Market 2023?” that looked at our mortgage interest rates prediction and the market for 2023.

Were we right?

Well yes. And no. The mortgage market has been difficult to navigate this year, and mortgage interest rates today have risen. They have fallen slightly as the rate of increase in inflation has slowed, but have fluctuated over the last few months.

As far as “no” goes, the fluctuation in rates has been challenging for mortgage brokers, and we have worked hard to make sure that paperwork is submitted quickly to take advantage of good rates, which in some cases have changed overnight. 

So overall the market has been unsteady. House prices have fallen slightly as we predicted, which does go some way to mitigating the increased cost of borrowing.

mortgage rates today

The Bank of England has recently raised the Base Rate of Interest to 5%. The rise is intended to continue the fight against inflation, which rose again in June by 0.2%. inflation now stands at 7.9% at the end of June. This increase has meant that the mortgage interest rates on some products may not be costed so rises in the cost of borrowing are likely in the coming months, particularly if inflation doesn’t come under control. The typical standard variable rate currently stands at 7.52%, while a two-year fixed rate is 5.59% and five-year fixed rate is 5.24% (correct at time of publication)

The message? If you’re in the market for a mortgage, don’t delay! 

uk mortgage rates chart and why we're not publishing one!

We could have published a chart here that shows you the rise in mortgage interest rates over the last twelve months. But we’re not going to. 

Why? It’s a simple answer. The best way at the moment to work out whether you should move house, remortgage or even take out a buy-to-let mortgage is to look at your own personal circumstances. 

Look at your income and expenditure and calculate what you and your family can realistically afford in mortgage repayments. You could work in   some scenarios. For example, what happens if you lose an income through illness, or need to pay for healthcare or another emergency. 

Once done, speak to a mortgage broker (such as ourselves), who can help you navigate the complexities of the mortgage market to find the best deal for your personal circumstances. Read our blog that looks at how a mortgage broker can support you through the whole mortgage process.

The Bank of England and the impact of base rate rises on Mortgage Rates

The Bank of England, founded in 1694, is the central bank of the United Kingdom. It operates autonomously but is accountable to the UK government and Parliament. The Bank’s primary responsibilities include formulating and implementing monetary policy to achieve price stability and support economic growth. It sets Base Rate of Interest, manages inflation, and issues banknotes.

Additionally, the Bank oversees the stability and resilience of the financial system through regulatory functions and acts as the “lender of last resort” to support banks during financial crises. Its decisions and actions significantly influence the UK economy and contribute to maintaining financial stability and confidence in the financial sector.

What is the Base Rate of Interest?

The base rate of interest is set by the Bank of England in the UK.  Its primary purpose is to influence borrowing costs in the economy and, consequently, provides stability to the economy.

On the 22nd June the Bank of England increased the Base Rate by 0.5% to 5.oo% 

This has meant that the cost of borrowing has increased, and subsequently mortgage interest rates have risen.

The picture isn’t quite that simple though. Some lenders have raised some of their interest rates and not others, some have made increases across the board, and so on. The mortgage market can be a minefield at the best of times, but with so much changing so quickly, speaking to a mortgage broker is a good option if you want to be certain that you’re getting a good deal. 

Will mortgage rates come down?

Mortgage interest rates go up and down over time. So they will come down as inflation eases and the Bank of England is able to stop raising the Base Rate, and begin to reduce it over time. Alongside that, lenders will price in anticipated rises in their costs ahead of time. That means that mortgage interest rates may not rise in line with the Base Rate of Interest. There are complex economic factors in play, but the short answer is yes, economists expect mortgage rates to fall in the next year or two.

Should I wait until mortgage Rates Fall Before I buy or Remortgage?

The answer to this really depends on your personal circumstances, what you can afford, and whether you want to wait. 

Remember that house prices have fallen and are forecast to continue to do so in 2023. That will mitigate some of the extra cost of your mortgage. it’s best to speak to a mortgage broker who can help you weigh up your options, costs, and affordability. Putting the right mortgage product in place now means that you will be able to budget properly, and when interest rates and the cost of borrowing fall, you will be able to take advantage of those savings then. 

How will different types of mortgage work for me today?

There are, of course, numerous options to choose from. In our recent blog we ran through the different types of mortgage and how they could work for you.

Right now, your personal circumstances could give you clues to the type of mortgage that would best suit you, and importantly, the term of any deal that you take out, whether that is a fixed rate, tracker, or another product. It is more important to run the numbers so that you can understand what you can afford, what would happen if your mortgage rate went up and your monthly payments increased, and how you will be best positioned when rates begin to fall so that you can reduce your monthly payments. 

Our Team is here to Help

We understand that the mortgage market is more complex and unpredictable than ever right now. We’re not here simply to find a mortgage. We’re here to help you to give you all of the support, guidance, and advice that you need to make the decisions that are right for you and your family. 

To contact us you can call us here or complete the form below, and a member of our team will get in touch.

Liddle Perrett Disclaimer

The information provided in this article was correct at the time of publication (June  2023)

Liddle Perrett Ltd is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.