The successive Bank of England Base Rate rises have sent mortgage interest rates soaring over the past few months, causing monthly payments for those on variable plans – as well as those needing to remortgage – to see a steady increase. Rates are now, however, “starting to drop”, but analysts are warning it’s getting “increasingly harder” to meet lenders’ criteria for those hoping to buy.
According to Anthony Codling, CEO of property platform Twindig, whether or not mortgage rates will increase for certain borrowers depends on three factors.
These include whether the person is securing a mortgage for the first time; if a fixed-rate deal is coming to an end; or where the person is on a floating rate or tracker mortgage.
Mr Codling told Express.co.uk: “If you are securing a mortgage for the first time, mortgage rates are lower now than they were in September and October.”
He explained that fixed-rate mortgages have been falling as “stability has returned” to the financial markets following the period of extreme uncertainty following Liz Truss’ Government’s mini-budget.
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However, Mr Codling continued: “If you are coming to the end of a fixed-rate deal and about to re-mortgage, you will find that mortgage rates have jumped up. For instance, monthly mortgage payments on two-year fixed-rate mortgages for a £100,000 mortgage are around £180 a month more today than they were one year ago.”
Those on a tracker mortgage, which means the mortgage rate is linked to the Bank of England Bank Rate, can expect mortgage rates to increase again.
Mr Codling explained: “The Bank Rate is currently four percent, and we expect it to increase to 4.5 percent in the Spring, adding around £25 per month to your mortgage for every £100,000 borrowed.”
When will mortgage rates go down?
Analysing the current market, Mr Codling said: “Mortgage rates for new mortgages are already starting to drop from their October/November highs, but it is difficult to see how they can keep dropping whilst the Bank of England Bank Rate is still increasing.”
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He continued: “Our best estimate at this stage is that the Bank Rate will start to ease from September at which point we expect mortgage rates to follow suit.”
However, he added: “We expect mortgage lending criteria to remain tight whilst house prices are falling. This means that being able to afford a mortgage is only half the battle because it is getting harder to qualify or meet the mortgage lending criteria.”
Scott Clay, head of introducers at specialist lender Together, told Express.co.uk: “Some experts are predicting that by Christmas, rates will start to come back down in line with falling inflation, so people might ride out this year and maybe fix next year when rates are on a more even keel.”
However, he noted: “I doubt we will see a return to an era of incredibly cheap mortgage credit and expect more ‘normal’ rates of between two percent and four percent for the average high street mortgage.”
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“Our prediction is to see rates relatively stable for a few months, see a slight increase in quarter two and then see a slight decrease later in the year.”
However, Mr Jackson added: “There will be predictions agreeing, disagreeing and everything in between. The truth is that trying to predict rates will see people getting it right and people getting it wrong.
“There will be no one that predicted 2020, 2021 and 2022 correctly. The most important thing to consider is your circumstances and what is best for you. Budgeting, moving, improving, and repayment methods are all personal.”
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