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Mortgage interest rates started to skyrocket almost two years ago when the market was disrupted by Liz Truss’s disastrous Mini-Budget, but fast-forward to present day and there are hugely positive signs that things are beginning to normalise.
Following the Bank of England’s decision to drop its base rate to 5% in August and continue to hold it there, mortgage providers have been reducing their rates and refreshing their product lines. The latest big names to introduce significant price cuts are Virgin Money, whose rates now start at 3.99%, and Halifax, who has reduced first-time buyer and homemover mortgages by 0.09 percentage points.
The news follows a major rates reduction by NatWest, with the bank introducing a 3.71% mortgage deal, the cheapest on the market since September 2022. This rate is attached to a 5-year fixed-rate mortgage that borrowers need 40% deposit to qualify for. It also includes a higher product fee than equivalent deals with higher rates.
Although NatWest’s latest 5-year fix is reserved for some of the most eligible customers, mortgage rates are on the way down across the board. Other major lenders to announce rate cuts this month include Santander, Principality Building Society and Barclays, with more expected to follow.
Does this mean mortgage rates will continue to fall?
It’s important to note that average mortgage rates on the whole are still higher than they were two years ago. According to data from Moneyfacts, the average rate on a 5-year fixed-rate mortgage is currently 4.7%, compared to 4.03% in September 2022.
But the good news is that, from here, mortgage interest rates are expected to fall further. The burning question right now is, when is this likely to happen?
According to John Tarazi, Teito director, co-founder and resident mortgage expert, another cut to the base rate is likely to land in November as the UK economy continues to improve.
“Although inflation levels could still fluctuate slightly, the consensus among mortgage experts is that we will be in for another base rate cut in November,” said John. “I wasn't surprised to see the bank play it safe during their September meeting and hold the rate at 5%.
“I think lenders share our optimism about the longer term direction of the base rate and will continue to reprice their ranges in a downward direction, perhaps very gradually, in anticipation for a probable November cut. There could be a major pricing war incoming.”
One thing is for sure, the mortgage options and low-rate deals available are improving all the time - get in touch to speak to a broker to find out what rate you could secure today.
