What’s The Latest With UK Mortgage Rates? – Forbes Advisor UK

The Bank of England raised interest rates on 3 November from 2.25% to 3.0%. The 0.75 percentage point increase marks the eighth rise since December 2021 when Bank rate stood at just 0.1%. It puts Bank rate at its highest level since November 2008.

Volatility and uncertainty

The cost of mortgages had already been climbing due to sterling volatility and market uncertainty, after the recent political turmoil, as well as rising Bank rate. Major lenders including NatWest, Barclays, Halifax and Virgin Money all pulled deals and brought them back to the market at higher prices.

The appointment of Rishi Sunak as Prime Minister has helped to settle the markets and the average cost of fixed rate mortgages has been edging down from its peak.

According to data provider Moneyfacts.co.uk, the average cost of two- and five-year fixed rate deals across all deposit levels today stands at 6.21% and 6.02% respectively. This compares to 6.65% and 6.51% on 20 October from when rates have been gradually edging down. However, the last time mortgage costs were at these levels was back in 2008 and 2010 respectively.

The average number of available mortgage deals available stands at 3,438. Numbers have continued to climb back up since the fall-out of September’s Mini-Budget when numbers fell to around 2,560 – but still compares to 5,300 recorded by Moneyfacts in December 2021 before interest rates began to rise.

With mortgage rates changing fast it’s important to remain calm and objective. It remains to be seen if the settling political landscape and tomorrow’s Autumn Statement will restore further stability. If so, this could ease pressure on the Bank of England to raise interest rates.

The next decision to be taken by the Bank’s Monetary Policy Committee (MPC) falls on 15 December.

Interest rates and mortgages

So what do climbing interest rates mean for the cost of mortgages so far?

The estimated two million homeowners on variable rate deals, such as base rate trackers, will see an almost immediate rise in their monthly repayments following the recent Bank rate rise to 3.0%. As an example, a tracker rate rising from 3.5% to 4.25% will cost around an extra £80 a month on a £200,000 loan.

Someone with a £250,000 mortgage over 25 years at the Moneyfacts average two-year fixed rate of 6.46% would see a rise in monthly payments from £1,520 to £1,643 – that’s up £123 (assuming the full rate increase was passed on).

Remortgagers and first-time buyers will also be faced with much higher mortgage costs when they come to source a deal – as set out above – with the cost of new fixed rates having already factored the latest rise into the price.

You can work out the monthly cost of a mortgage against various interest rates with our Mortgage Calculator.

House prices and Stamp Duty

As well as more expensive mortgages, those looking to buy or move home are grappling with asking asking prices that are 7.2% higher than 12 months ago, according to Rightmove. Its latest House Price Index found that the average cost of property coming to market in November stands at £366,999.

However, it also reported further signs of a slowing market, with asking prices dropping by 1.1% compared to last month, while the annual rate of inflation slowed from 7.8%.

Stamp Duty cuts announced in September’s ill-fated Mini Budget – which raised the nil-rate band on the purchase of a property from £125,000 to £250,000 – means that a third (33%) of all homes listed on Rightmove are also now exempt from the tax. While u-turns were made on the other tax breaks announced under former Prime Minister Liz Truss, this one will remain in place.

Why are interest rates rising?

The Bank’s MPC uses interest hikes as a means of cooling the economy and taming rising inflation. The Consumer Prices Index (CPI) measure of inflation rose to a heady 11.1% in the 12 months to October against a government target of 2%.

If inflation continues to rise, some forecasters are suggesting that Bank rate could reach 6% by next year.

One of the main longer-term drivers behind rising inflation is the cost of energy. The government intervened by replacing the energy price cap – which had been due to send prices soaring to more £3,500 a year from 1 October – with a cheaper Energy Price Guarantee (EPG).

The EPG would limit the energy costs of typical-use household bills to £2,500 a year.

However, while the scheme was initially due to run for two years, Chancellor, Jeremy Hunt has confirmed it will end April 2023.

The additional £400 automatic discount applied to electricity bills for every household between October 2022 and March 2023 remains in place.

What mortgage deals are available?

With upwardly-mobile Bank and inflation rates, keeping track of mortgage costs is increasingly challenging – especially when rates change, and deals can be pulled, on a daily basis.

One simple way is use our mortgage tables, powered by online mortgage broker, Trussle.

To find out what deals are available at today’s rates for the kind of mortgage you’re after, you’ll need to enter your personal criteria into the table below. Here’s what to do:

  • Select whether the mortgage is to fund a house purchase or if it’s a remortgage for an existing property
  • Enter the property value and the mortgage amount you require. This will automatically generate a percentage which is known as your ‘loan to value’. The lower your loan to value, the cheaper the mortgage rates available
  • Tick the relevant box if it’s a buy-to-let or interest-only mortgage (you’ll need a repayment strategy in place for these deals), or if you’re looking for a mortgage to fund a shared ownership property
  • Finally, filter your search by the type of mortgage you want, for example a two- or five-year fix or tracker. The filter is set to a complete mortgage term of 25 years but you can change this if required.

Here’s a live table of the mortgage deals available today.

What else do I need to know?

Mortgage deals offering the cheapest rates usually come with fees attached. You can opt to pay these upfront or add them to the loan. To factor in the cost of the fee, order your the results by ‘initial period cost’ (in the ‘Sorted by’ dropdown).

Alternatively, you can order results by initial rate, lowest fee or monthly repayment – even by the lender’s ‘follow on’ rate that the deal will revert to at the end of the term.

The very cheapest are reserved for bigger deposit amounts, usually of 60% of the property value or more. And, in all cases, you will need a sufficient income and clean credit history to be accepted for a mortgage.

If you want to see what your monthly mortgage payments might look like in different scenarios while overlaid with household bills, our Mortgage Calculator will crunch the numbers.

When can I start a remortgage?

Once issued, mortgage offers tend to be valid for six months. If you are looking to remortgage your current home, this means you can lock in a rate you see today – at no cost and with no strings attached.

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