What is happening with mortgage rates?
Mortgage rates are on the way down, but should borrowers hold off applying for a cheaper deal in the hope that they might have further to fall?
Homebuyers and those looking to remortgage are spoilt for choice when it comes to mortgage choice, which is at a 17-year high. There are currently 6,993 different deals to choose from, according to the latest Moneyfacts UK Mortgage Trends Treasury Report. The last time there were more mortgages available was in October 2007 when borrowers could pick from 7,421 deals.
Several lenders have reduced their mortgage rates in the run up to and following the Bank of England’s decision to cut the base rate from 4.5% to 4.25% earlier this month. According to Moneyfactscompare.co.uk, average two-year fixed rates have fallen to their lowest level since the disastrous 2022 mini-Budget and are now at 5.18%, while five-year average fixed rates are at a six-month low of 5.10%.
Bear in mind that these are only average rates, and the best deals are much lower than this. However, you’ll usually only qualify for the cheapest mortgage rates if you have a significant deposit to put down if you’re buying, or a large amount of equity in your property if you’re remortgaging.
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For example, Nationwide recently reduced its mortgage rates for existing customers switching to a new deal or new customers remortgaging by up to 0.22 percentage points. The building society’s cheapest deal is fixed at 3.84% for either two or five years for new customers looking to remortgage, but is only available to those borrowing up to 60% of the property value, known as the loan-to-value. That means you’d need at least 40% equity in your property to qualify for this rate. If you only had 25% equity, the cheapest fix Nationwide offers is 4.54% for two years.
David Hollingworth, of mortgage brokers London & Country mortgages, said; “The lowest two-year fixed rate for remortgages (without any current account or premier banking requirement) at the moment is from Santander at 3.82% to 60% loan-to-value with a £999 fee.
“Just two months ago it was also offering one of the best two-year fixed deals but the rate was 4.11%. Similarly, three months ago HSBC’s lowestfive5 year fixed for remortgage was 4.19% to 60% loan-to-value with a £999 fee but it now offers a deal at 3.84%.”
Although mortgage costs have already come down significantly in recent months, with many expecting further cuts to the base rate, it might be tempting to delay any mortgage decisions for now.
However, this could mean they miss out on competitive rates available now if rate cuts take a while to happen. Mr Hollingworth said: “Borrowers would be better to shop around for a new deal in good time, three or four months before their deal ends. That will secure a rate but still allow them to review the deal if rates continue to drop before completion. If they wait and rates fall more slowly, we could even see fixed rates edge up a little.”