Photo by Mortgage Rates on the Downswing: What’s Next for UK Borrowers?
The UK mortgage market is abuzz with the latest news: HSBC, Barclays, and NatWest have all slashed their mortgage rates, sparking hopes of a summer rate cut from the Bank of England. But what does this mean for borrowers, and will rates continue to fall?
Mortgage rates have come down this week
The rate cuts from HSBC, Barclays, and NatWest apply to new mortgage deals, product transfers, and remortgaging. This move is seen as a positive step for borrowers, who have been facing rising interest rates in recent times. Michelle Lawson, director at Lawson Financial, notes that “temperatures may be on the rise at last for the British summer, but rates are thankfully on their way down.” 1
However, despite this welcome news, average mortgage rates are still more expensive than what millions of people who fixed on a cheap rate before interest rates started rising are used to paying. The average rate on a two-year fixed deal stands at 5.96%, while the average five-year fix is 5.53%. 2 This year, about 1.6 million existing borrowers will see their cheap fixed-rate deals expire.
Mortgage expiration dates loom for millions of borrowers
If your mortgage is due to expire, it’s essential to compare rates now and speak to a mortgage broker to explore your options. Generally, lenders allow you to secure a new deal three to six months in advance. If rates continue to come down, you may be able to cancel the deal you’ve agreed to and sign up to a cheaper rate - but check with your lender before signing up first to see if there are any fees.
New analysis from property website Rightmove suggests that someone getting onto the property ladder now can expect to pay around £400 more per month for their mortgage than five years ago. Rightmove also found that first-time buyers now face paying £227,757 for a home, up by nearly a fifth (19%) since 2019. 3
First-time buyers face higher mortgage payments
In related news, UK Finance has revealed that interest-only customers continue to redeem on or ahead of schedule. There were 664,000 pure interest-only homeowner mortgages outstanding at the end of 2023, 5.4% fewer than in 2022. 4 Although the overall interest-only stock continues to fall, the number of interest-only loans at higher loan-to-values (LTVs) - over 75% - rose by 2.9% in 2023.
Interest-only mortgages see a decline
Charles Roe, director of mortgages at UK Finance, notes that “although the mortgage market saw difficult conditions in 2023, most interest-only borrowers continued to repay on or ahead of schedule.” 5
As the mortgage market continues to evolve, one thing is clear: borrowers must stay vigilant and keep a close eye on interest rates. With the Bank of England’s next meeting on August 1, all eyes will be on whether rates will continue to fall.
