What will happen to UK mortgage rates? – Forbes UK Advisor

The Bank of England raised interest rates in August from 1.25% to 1.75%. The 0.5 percentage point increase marks the sixth hike since December 2021, when the Bank Rate was just 0.1%. It also places the discount rate at its highest level for 14 years.

Interest rates and mortgages

So what does rising interest rates mean for mortgages? The two million homeowners with variable rate offerings, such as base rate trackers, will see an almost immediate increase in their monthly repayments. For example, a trailing rate going from 3.5% to 4% will cost nearly £60 more per month on a £200,000 loan.

Mortgages and first-time buyers will also face higher mortgage costs when they come to find a deal, with the cost of new fixed rates having already factored in the latest rise in price.

In addition to more expensive mortgages, those looking to buy or move are struggling with average house prices that were 10% higher in August compared to 12 months ago, according to the latest prices report. Nationwide accommodations. However, the annual rate of house price inflation eased from the 11% recorded in July, the lender said.

Other key house price indices also point to a more general slowdown in growth due, in part, to more balanced supply and demand. According to the latest data from Rightmove, there were 13% more sellers in June this year compared to 12 months ago, while demand for homes is expected to slow in the face of rising costs of living.

Fixed rate mortgages

A growing number of homeowners are now opting for longer term fixed mortgages in a bid for stability in the face of continuing rising interest rates. But while borrowers have historically paid more to stay longer, this price gap is narrowing and, in some circumstances, has completely disappeared.

According to Rightmove, the average interest rate on a 75% fixed rate mortgage is now 2.9%, whether it’s a two- or five-year term. You can find more mortgage news on our mortgage updates page. And refer to our mortgage tables below for the offers available today based on your deposit level and situation.

Why are interest rates rising?

The Bank of England’s Monetary Policy Committee is using interest hikes as a tool to cool the economy and bring soaring inflation under control. The consumer price index inflation measure jumped 10.1% in the 12 months to July 2022, marking its highest level in 40 years.

But the Bank of England now predicts inflation could top 13% by the end of the year due to factors such as rising energy and food costs resulting from the Russia-Ukraine conflict.

Energy regulator Ofgem has also confirmed that the upcoming energy price cap – which impacts how much a typical-use household pays for their energy bills – will be 3 £549 a year from October 1, fueling runaway inflation.

Currently, the cap is £1,971 per year, having last been set in April.

The next inflation rate announcement is scheduled for Wednesday, September 14, with the next Bank Rate decision scheduled for September 15.

What are today’s mortgage rates?

With bank and inflation rates on the rise, it’s hard to keep track of mortgage costs, especially since they can change daily. An easy way is to use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.

To find out which offers are available at the current rates for the type of mortgage you are looking for, you will need to enter your personal criteria in the table below. Here’s what to do:

  • Indicate whether the mortgage must finance the purchase of a house or if it’s a mortgage for an existing property
  • Enter the property value and the mortgage amount you need. This will automatically generate a percentage which is known as your ‘loan to value’. The lower the value of your loan, the lower the mortgage rates available
  • Check the appropriate box if this is a purchase for lease or interest-only mortgage (you will need a repayment strategy in place for these transactions), or if you are looking for a mortgage to fund a shared ownership property
  • Finally, filter your search by type of mortgage you want, for example a patch 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.

What else should I know?

The mortgage offers offering the cheapest rates usually come with fees. You can choose to pay them upfront or add them to the loan. To account for the cost of fees, sort your results by “initial period cost” (in the “Sorted by” drop-down menu).

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

While mortgage rates change daily, the cheapest are reserved for larger deposits, typically 60% of the property’s value or more. And in any case, you will need sufficient income and a clean credit history to be accepted for a mortgage loan.

If you want to see what your monthly mortgage payments might look like under different scenarios while stacked against household bills, our mortgage calculator will do the sums.

While Trussle lists around 12,000 mortgage deals from 90 lenders – representing the vast majority of the market – some deals are sometimes available exclusively through a handful of brokers, so you might not see them.

When can I start a mortgage?

Mortgage offers from major lenders tend to last six months (as noted in our Best Lenders for Remortgage), although some lenders cap expiration dates at three months. If you’re looking to remortgage your current home, that means you can lock in a rate you see today – free of charge and with no strings attached.


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