The aftermath of the mini budget in 2022 caused a disastrous rise in mortgage rates, leaving many homeowners in shock with how they were going to budget for the steep rise in monthly payments. However, we have seen a dramatic drop in prices since then, with the average rates around 1.35% lower for two and five-year fixed mortgage deals.
This is great news for those wanting the security of a fixed-rate mortgage, enabling them to budget better per month. Let’s take a closer look at some numbers.
What is happening with fixed-rate mortgages?
As mentioned above, fixed-rate mortgages have seen a huge decrease in cost in the aftermath of the disastrous mini-budget in November 2022, with the average two-year fixed-rate deal standing at 4.67%, previously at 5.9%. The average five-year deal now stands at 4.32%, which has dropped from 5.67% currently. This means that borrowers could now benefit from lower monthly payments of over £100 per month for a typical £150,000 repayment mortgage over 25 years, and compared to only a few months ago, homeowners opting for a fixed-rate mortgage could pay £1,308 less per annum for a two-year fixed-rate mortgage today and £1,415 less for a five-year mortgage.
What is happening to the standard variable rate (SVR)?
The same cannot be said for the standard variable rate. Since November 2022, where the average for top ten lenders saw 5.6%, it has now climbed to 6.73%, meaning that monthly payments that were at around £932.81 have risen to £1,034.47, quite a significant leap and one that can make budgeting extremely difficult.
Also, since the Bank of England base rate increased in February, it’s possible that this figure will rise again.
Is there a price war between mortgage providers?
This rollercoaster ride of mortgage rates has created huge competition between lenders, and it just so seems that a price war has broken out in a bid to gain more attention from borrowers, therefore pushing fixed rate costs right down. Rate cuts are expected to continue, even through the most recent base rate increase.
This doesn’t mean however, that we should envisage a drop to where interest rates used to be, it is still extremely important to plan ahead, especially for the low-interest rates that are due to expire soon. Borrowers that are currently on a standard variable rate should urgently review their options as SVRs are currently sat around 7% or more.
Speak with a mortgage broker to review your options
There is so much information to take on board at present around the rise and fall of mortgage rates and more importantly, where they will likely go next. Deciding which mortgage deal would be best for you is paramount in these uncertain times.
Here at TaylorMade, we are mortgage advisors that can provide professional, independent mortgage expertise and helpful advice on which mortgage would be best suited to your circumstances. We offer the best mortgage rates in the market today, so if you are seeking financial advice, our friendly team is here to help.
Source: YourMoney
