This year seems to have gotten off to a good start where mortgages are concerned. Several major lenders have slashed their fixed mortgage rates, in good time for the 1.6 million borrowers due to renew this year.
Although we can breathe a small sigh of relief, rates for both re-mortgagers and first-time buyers are still high. This is why our team at your expert
mortgage brokers in Manchester thought we would try and scope out the market as best we can to help you make informed decisions on where best to spend your money.
How Have UK Mortgage Rates Changed?
The disastrous mini-budget of 2022 saw mortgage rates jump through the roof and again in the Summer of last year, where they jumped to their highest level since the financial crash of August 2008. 6.94% was the average 2-year fixed deal back then. With the stabilisation of the economy, interest rates dropped significantly, and in December 2021, the average 2-year fixed mortgage rate was 2.34%, with deals coming in cheaper, and if you had a large amount of equity built up in your home or had a sizeable deposit, then you could get a mortgage under 1%.
Inflation then soared and the Bank of England started to raise interest rates to counteract this, mortgage rates then followed suit, giving us some of the highest rates we’ve seen in recent years. Now, inflation has started to creep back down and thankfully, interest rates are, steadily, following suit.
Are Mortgage Rates Going Down?
There is now much more confidence starting to seep back into the mortgage market, due to the steady fall in inflation and the ability to pre-empt base rate moves by the Bank of England more clearly and increase or decrease their prices accordingly. It is also blindingly obvious to lenders just how much mortgage rates have put off first-time buyers and re-mortgagers, with the number of people struggling to make their repayments having risen. Due to this, a few lenders decided to cut their mortgage rates, and, in an attempt, to compete, other lenders rushed to cut theirs.
HSBC became the first major lender to lower their mortgage rates this year to below 4%, with a 5-year fixed deal at 3.94%. This means that a household with a £250,000 balance to pay over 20 years, coming to the end of a fixed rate mortgage, could look to save £114 a month in repayments, with a 0.85% point cut. Just this week, the Co-Operative Bank slashed its 2-year fixed product transfer mortgage rate to just 3.85%. Which is only for existing Co-Operative mortgage customers, but it still helps them to cut through competitors.
Cheapest Mortgage Rates in the UK Market Right Now
According to Moneyfacts, as of 9th January 2024, the average mortgage rates currently stand at-
- 5.76% for a 2-year fixed deal
- 5.37% for a 5-year fixed deal
A standard variable rate (SVR) as of 1st January 2024 is currently at 8.18%.
Many experts in the mortgage market believe interest rates have peaked after the BoE paused its continuous hikes in September and November, that being said, inflation still stands at 3.9%, which is almost double the Bank’s 2% target. If inflation continues to fall, industry insiders are optimistic that average mortgage rates could fall below 5% again in 2024.
Does This Drop in Rates Affect Everyone?
In short yes, the drop in rates will affect everyone but in varying degrees depending on the types of products sought after. Cheapest deals tend to be targeted toward existing homeowners either looking to move or remortgage, as well as those with a lot of equity or deposits. It is important to remember that the bigger your deposit, the lower your mortgage rate, your credit score must be in optimal condition to secure a good deal, and the longer the mortgage deal, the lower the rate than shorter-term deals.
For first-time buyers with small deposits (between 5% and 10% of the value of the home), it may mean that you are limited in deals available to you. Interest rates tend to be higher as lenders will see you as riskier unless you can offer a larger deposit.
Need to Take Action? Speak to an Independent Mortgage Advisor in Manchester
If you are due to remortgage this year and are feeling overwhelmed with where to start, wondering if rates are going to drop or rise further, then TaylorMade, an
independent mortgage advisor in Manchester can help.
If you are a current homeowner, struggling to keep up with your increased monthly payments or a first-time buyer wondering how to navigate the market in your current financial situation, then a professional, independent mortgage broker with access to the best deals on the market today could be the answer to your problem.
We offer jargon-free, helpful advice to aid you in understanding how today’s uncertain economy could impact you and how we can help you navigate house price and mortgage price fluctuations. Contact our specialist
mortgage broker in Manchester today to see how we can help.
