If you’ve been following the news, you’re sure to have heard plenty of talk about mortgage interest rates rising over the last few months, along with the continuing rise of the Bank of England base rate.
And, the subject of inflation is never too far from these conversations either. But how are they linked, and more importantly, what does it mean for your mortgage?
It can be hard to keep track of the mortgage landscape, let alone figure out the best time to buy, move or remortgage. Which is why you need advice from a mortgage expert!
Your local Beewise advisor will always be up to date with the latest information, and be able to explain how it relates to you personally, helping you make the most suitable decisions.
Email a Beewise mortgage expert here, call us to chat on 01934 204841, or keep reading to find out why rates have risen, whether they’ll keep rising, and when – or if! – interest rates will settle.
Whether you're exploring your mortgage options, trying to calculate future monthly mortgage payments, or simply curious about mortgage rates, this jargon-free post is a must read.
We’ll also look at predicted mortgage rates, as we know many people are holding out for a return to those 1-2% fixed rate deal days. Read on to discover if they’ll ever be a possibility again...
What’s the best mortgage interest rate right now?
This is one of the most common questions we get asked, and not as easy to answer as it seems.
Are you a first time buyer, looking to move, or do you need to remortgage? How much deposit do you have, or how much is your house worth? If you’re looking to remortgage, do you want to borrow extra money?
How long will we be fixing your mortgage for? Maybe 2 years, 3 years, 5 years or even 10 years?
Rates tend to differ from lender to lender, and each lender has a range of different products, generally depending on whether you’re a first time buyer, home mover, remortgaging your home, or buying or remortgaging a Buy to Let property.
Within these product categories, they’ll have different rates again according to your loan-to-value (LTV) bracket – the loan amount you’re looking to borrow vs the value of the property.
They’ll usually have a range of products within each category too, fixed for different periods of time, and with different fees attached.
As a general rule right now, 5 year fixed products have a lower interest rate than 2 year fixed products, as lenders want to keep your business as long as possible.
But this isn’t always the case and can vary from lender to lender. Plus, a 5 year fixed deal might not be the most suitable option, which is why taking advice from a mortgage expert is important.
Also, some products may have a lower interest rate but charge an arrangement fee to take out the mortgage, ranging anywhere from £400-£4000+. And, some will have a higher interest rate but no fees attached.
Don’t worry though, your Beewise advisor will take all this into account. And as we work with banks and building societies across the whole of the market, we’ll accurately calculate the most suitable deal for you.
So the short answer on interest rates? It completely depends on your situation, so contact us on 01934 240 841 for tailored advice! And for 5 more reasons why you should use a Beewise advisor, click here.
Can anything else affect what mortgage rate I could get?
Definitely. To find out which deals you might be eligible for, your Beewise advisor will also consider factors like your credit history, the property type and how much you’ll want to borrow for your new mortgage.
Just as banks and building societies have different rates, they also have different criteria around how they treat self employed income, adverse credit, regular overtime, monthly commitments like loans and credit cards, and more.
They also have different loan-to-value limits for certain property types like flats, and for additional borrowing when remortgaging.
And as each lender calculates affordability in their own way, there could be one willing to offer a much higher mortgage loan than others, but it may mean opting for a slightly higher interest rate.
Beewise always stay up to date on the latest lender criteria, so we’ll look at the right rate and overall cost available to you, offering advice and making sure your mortgage and monthly repayments are the right fit for your circumstances.
Click here to find out more about how lenders calculate mortgage loan affordability. And, click here to arrange an initial chat with your local Beewise advisor.
Why have mortgage interest rates been going up?
Well, there are a lot of factors. With a recession in 2009, the Brexit vote in 2016, lockdown in 2020, Russia’s invasion of Ukraine in 2022 and our current cost of living crisis, there’s been economic instability in the UK for a while.
All this has had a huge impact on inflation, which until recently was the highest it’s been for over 30 years. But how and why does inflation affect mortgage interest rates?
Inflation is the rate at which the prices of goods and services rise. To keep inflation stable, the Government sets a target of 2%.
If inflation goes up, say to 3%, it means prices are 3% higher on average than they were a year ago. So, the Bank of England may increase the base rate to discourage increasing prices and try to reduce it back to the target 2%.
This impacts mortgages in a couple of ways. Firstly, when the base rate rises, interest rates tend to rise on saving and borrowing. Lenders might not change their rates by the same amount, but they usually increase them to cover their costs.
It also pushes up swap rates, the rate at which lenders secure money for their fixed rate mortgages. Swap rates are based on what the markets think interest rates will be in the future, so if they think they’ll be higher, mortgage lenders increase their rates too.
We started January 2023 at an inflation rate of 10.1% - way higher that the target 2%! But, the government were positive they could bring this down significantly by the end of the year.
However, over the last couple of months the expected changes to achieve this haven’t been seen, which in turn lead to the Bank of England continuing to raise the base rate, and markets regularly increasing their swap rates.
Essentially the UK’s economic instability seems to be continuing, creating a lack of certainty across the mortgage market, and predictions of repeated interest rate increases over the next few months.
How much will this affect my monthly mortgage payments?
Beewise have a handy tool on our website to help with this! Click here to access our mortgage repayment calculator, where you can type in your mortgage amount, number of years left to repay and the current or predicted interest rate.
If you’re looking to remortgage, you’ll probably find your predicted monthly payments will go up considerably, especially if you were lucky enough to be on a rate of around 1-2%.
With many mortgage interest rates around the 5-6% mark, there are ways your Beewise advisor can help keep those monthly payments within budget, especially if you’re looking to remortgage and borrow more.
And, the same goes for first time buyers and home movers – ensuring monthly mortgage payments are affordable is more important than ever in today’s uncertain financial climate.
It’s more important than ever to seek expert advice on your mortgage choice, and with evenings and weekend appointments available, we’re here to save you time, money and stress with a solution that fits your busy life.
Should I wait to buy, move or remortgage?
Sitting tight might seem like the best option, but the truth is none of us can be certain what’ll happen with mortgage interest rates at a future date.
And, while we’d always recommend talking your situation through with a Beewise advisor for a more accurate picture – click here to arrange a call or ring 01934 204 841 – here are some points to consider for these situations.
If you’re a first time buyer and paying rent right now, that’s equivalent to a 100% interest rate – not a single penny is going towards clearing a mortgage! Plus it’s worth considering that while mortgage interest rates are currently higher than they have been for a while, it’s predicted that we won’t see those super-low rates of 1-2% again – pending another global crisis… So, it’s worth weighing up the benefits of getting on the property ladder now vs paying your landlord’s mortgage for them.
If you’re a looking to move house, consider the wider housing market. It might not seem like the ideal time to lock into a fixed rate, but house prices have come down since last year, and the pace of the market has slowed. Properties aren’t always getting snapped up as quickly, giving you time for a second viewing, and even to negotiate on the offer price. When mortgage interest rates are low, properties tend to be in higher demand - AKA more expensive! There are always ups and downs in the housing market, so if you’re not investing in property and just want to downsize or upsize, don’t rule it out.
Need to remortgage in the next few months? Then definitely don’t wait! Your local Beewise advisor can secure you a new fixed rate up to 6 months in advance. That means you’ll be protected against any more rate rises, and if interest rates do come down before your new mortgage starts, we can switch it to a cheaper deal for you.
If you really don’t want to be tied to a fixed rate deal, we can also look at options such as tracker mortgages, which follow the base rate. Some of these even come with no early repayment charges, meaning you’d have the freedom to switch later down the line.
Is it best to fix my mortgage for 2 years and hope rates are better by then?
This crops up quite often in conversations, but again isn’t straightforward to answer as we give advice based on your bigger picture.
Are you thinking of moving in the next 2-3 years? Do you want the certainty of fixed monthly payments without worrying about remortgaging in the short term? Are you happy to fix for a longer term to get a better rate right now?
There’s more to mortgages than the cheapest deal on the day, which is why we tailor our advice and knowledge to you and your situation.
And, while mortgage interest rates are predicted to be nearer 4-4.5% by December 2024, we all know how quickly wider global circumstances can affect an economy.
The next general election is also scheduled to occur by the end of January 2025 – something which could potentially have a negative or positive impact on mortgage interest rates.
If you want to keep your options open with mortgage interest rates, a 2 year fixed deal could be right for you. Or possibly a 3 year fixed deal, something more lenders are offering to bridge that gap between a 2 year and a 5 year commitment.
While your local Beewise advisor can chat you through what’s happening in the market and what’s predicted, we’ll always consider your situation as a whole to get the right mortgage for your needs, and the most suitable deal in the long run.
When will interest rates come down, and what will they reduce to?
Ah, the million dollar question! While no one has a crystal ball, there are always forecasts put forward by financial experts.
The trouble is, unforeseen changes in the market can often mean these change quite quickly. For instance, at the start of the year the base rate was predicted to settle around late summer. However, latest reports say it could now rise from its current 5% to nearer 6% by the start of 2024.
As mentioned before though, the base rate is linked to inflation. So, if inflation does lower and get significantly closer to that target 2%, mortgage interest rates would hopefully start to come down.
In previous times of financial uncertainty though, lenders tend to lower rates more cautiously than they increase them, wanting to ensure they do the right thing for themselves and the market.
There are also other factors to consider with mortgage interest rate reductions, such as a lender’s capacity to take on new mortgages.
If just one lender reduces their rates, chances are they’ll be so inundated with applications, they’d be unable to process that volume of work and would quickly change their rates again!
But overall the outlook is positive. Currently, the central bank has targeted getting inflation down to 2% by the end of 2024, with the Bank of England predicting interest rates will fall to around 3.5% by 2025.
The best way to keep on top of the mortgage market? Follow Beewise on Instagram and Facebook! We’ll always share the latest news on our socials, and keep you informed with helpful advice and expert guidance.
To chat about the mortgage market and interest rates further, ring 01934 204 841 or email your local Beewise mortgage advisor to arrange a call, with evening and weekend appointments available. And, check out our 225 5 star Google reviews! Voted Best Mortgage Office in the UK 2022, you’re in safe hands with Beewise FS Ltd.
Looking for more expert mortgage advice? Check out these other helpful blog posts!
Think carefully before securing your debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.