What is happening to UK mortgage rates?

The Bank of England raised interest rates on December 15 from 3.0% to 3.5%. The increase of 0.5 percent marks the ninth increase since December 2021 when it was just 0.1%. It put the cost of the Bank at its highest level since 2008 and further increased the cost of borrowing.

Volatility and uncertainty

Mortgage rates also rose after the Budget last September due to high prices and market uncertainty. Major investors 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 helped stabilize the market and the average mortgage rate continued to fall from its high.

Average price of popular prices

Our mortgage partner says, Better.co.uk (pre-Trussle), the average rate of fixed exchange across all deposit categories today stands at 5.05% (two-year fixed), 4.90% (three-year four fixed) and 4.65% (five years fixed). This compares to a high of over 6.50% in October.

Better.co.uk says the most competitive deals are 4.23% for two years and 4.25% for five years. Currently, it is the cheapest long-term bond with the best 10-year bond trading at 4.04%.

The average two-year tracker rate today stands at 4.10%, while the standard deviation rate (SVR) is 6.38%, according to Better.co.uk.

Currently, there are approximately 4,000 residential mortgages on the market. The figure has risen since last Autumn’s Budget when it fell to 2,560. But it’s still far from the 5,300-plus transactions on the market in December 2021, before interest rates start to climb.

A political situation with a slight drop in inflation rate to 10.5% could ease pressure on the Bank of England to raise interest rates further in 2023. We have collect some special ideas how it affects the mortgage market.

The next decision to be made by the Bank’s Policy Committee (MPC) is scheduled for 2 February 2023.

Interest and mortgages

So what does interest rate hike mean? the cost of mortgages so far?

There are about two million homeowners on variable rates, ie rate base, will see the latest increase in their monthly salary following the Bank’s recent 3.5% increase. For example, the tracker rate increases from 4% to 4.5% costing about £50 extra per month on a £200,000 loan.

Those on fixed deals, where interest is locked in for, say, two or five years, see no difference in their monthly payments. But after their transaction, they may find they have to pay a higher rate for their next mortgage due to recent increases in the Bank’s prime rate. .

Calculate the monthly cost of a mortgage based on different interest rates and our Mortgage planning.

Housing Fees and Stamp Duty

Despite being beyond the realms of affordability for many, house prices in the UK have begun to fall. The average price of a property listed on Rightmove in December was set at £359,137, according to the website’s latest figures.

Although it was 5.6% higher than last December, it was a slight decrease from the year-on-year growth in November which was recorded at 7.2%.

On a month-over-month basis, asking prices have fallen by 2.1%.

Tim Bannister at Rightmove, said: “The fall in prices is a clear short-term response to the economic turmoil we saw at the end of September and October, before it started to calm down.”

Rightmove expects property prices to fall by a further 2% over the course of this year.

Stamp Duty cuts announced in the Budget raised the price of a property from £125,000 to £250,000. While a u-turn was made on other tax breaks announced under former Prime Minister Liz Truss, this remains the case.

Why are interest rates rising?

The Bank’s MPC uses interest rate hikes as a way to stabilize the economy and reduce inflation. The Consumer Price Index (CPI) inflation rate it rose 11.1% in the 12 months to October. And although it decreased back in November to 10.7%, it reached the current 10.5% in December, but these figures should be set in the current situation. is estimated at 2%.

If the inflation rate remains high, some forecasts say that the cost of the Bank could reach 4.5% this year.

One of the main reasons for the long term behind the increase in prices is the cost of energy. Under Ofgem’s control cost of energyannual fees for a typical household may drop to £3,549 from 1 October, and continue to £4,279 from 1 January 2023.

But the government has replaced the price with its own ‘affordable’ Energy Price Guarantee (EPG). Standard annual fees are capped at £2,500 until 31 March 2023, then £3,000 from 1 April 2023 for the next 12 months.

What mortgage deals are available?

With mobile banking and pricing, monitoring mortgage rates is becoming increasingly challenging—especially when rates change, and can drag on. buy, every day.

One easy way is to use our mortgage tables, powered by Better.co.uk.

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

  • Decide whether the mortgage b finance a home purchase if a remortgage for an existing property
  • Enter the property value and the mortgage you need. This will automatically give you a percentage called your ‘loan to value’. The lower your loan to value, the cheaper the mortgage payments will be
  • Check the appropriate box if buy-to-let or interest-only mortgages (you will need a repayment plan for these transactions), or you are looking for a mortgage to finance a jointly owned property
  • Finally, filter your search by type of mortgage you want, for example an upgrade or a two or five year tracker. The filter is set to a full mortgage term of 25 years but you can change it if needed.

Here is a live table of current mortgage rates.

What else should I know?

Mortgage deals that offer the cheapest rates usually come with fixed fees. You can choose to pay these upfront or add them to the loan. To calculate the cost of the fee, sort your results by ‘prior period cost’ (in ‘Sort by’).

Alternatively, you can order results at upfront rates, down payments or monthly payments – even with a ‘follow on’ rate. Lenders will return the transaction at the end of the period.

The cheapest funds are reserved for large deposits, usually 60% of the property’s value or more. And, in all cases, you need an income as well pure history to be accepted for a mortgage.

If you want to see how your monthly mortgage looks like in different scenarios when combined with household bills, we Mortgage planning numbers will be destroyed.

When can I remortgage?

Once issued, mortgage offers are usually valid for six months, although a small number of lenders such as Skipton Building Society offer for up to 12 months. If you’re looking to remortgage your current home, this means you can lock in a rate today – for free and with no strings attached. .


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