What Next for Mortgage Rates – And How Long Should You Fix For?

Share On...

What Next for Mortgage Rates – And How Long Should You Fix For?

As an established estate agent in Finnieston, Glasgow, I closely monitor the mortgage market to provide the best advice to my clients. Recently, we’ve seen some interesting developments in mortgage rates that are worth discussing.

Falling Fixed Mortgage Rates

There’s good news for those considering buying a property. After reaching a summer peak, fixed mortgage rates are on the decline. For instance, a number of fixed-rate deals have now fallen below 5%.

This drop is a response to a series of base rate hikes and high inflation figures earlier this year. At its peak, the average two-year fixed mortgage rate hit 6.86%, while five-year rates reached 6.37%. However, these rates have been steadily declining. As of 8 November, five-year fixed rates averaged at 5.83%, with two-year fixed rates at 6.24%.

The Market’s Positive Shift

Rachel Springall, a finance expert at Moneyfacts, highlights this trend. She points out that both the average two-year and five-year fixed rates have fallen for the third consecutive month, offering borrowers more affordable options.

However, it’s worth noting that just two years ago, these averages were around 2.75% for a five-year fix and 2.5% for a two-year. This means that while rates are falling, they are still higher than what we saw in the recent past.

Attractive Deals for Homebuyers

For those with larger deposits, particularly attractive deals are emerging, especially in the five- or ten-year fixed-rate categories. Some of the best deals are now launching at rates less than 5%.

Understanding Mortgage Rate Trends

When considering a fixed-term mortgage, it’s important to look beyond the current base rate and consider market forecasts. Banks often adjust their mortgage rates based on predictions of future base rate changes and inflation duration.

In recent months, expectations for the base rate peak have adjusted, dropping from a high of 6.5% to around 5.25%. These market expectations are mirrored in swap rates, which are a good indicator of future interest rate trends.

Why the Rise in Mortgage Rates?

The initial rise in mortgage rates can be traced back to the end of 2021, coinciding with increasing inflation, prompting the Bank of England to hike the base rate. The situation was exacerbated by the mini-Budget announcement in late September, which unsettled the markets. However, with the reversal of many of these announcements and a lower than expected inflation figure in June, the markets have calmed, and mortgage rates have started to drop again.

The Impact on House Prices

House prices have seen a 3.2% drop over the last year, with various forecasts suggesting a continued decline in the short term. However, firms like JLL and Savills predict a rebound in prices from 2024, with an estimated total growth of around 18% over the next five years.

The Future of the Base Rate

The Bank of England has increased the base rate steadily over the past year, but recent decisions have seen it held at 5.25%. The future of the base rate will largely depend on inflation trends. While the current forecasts don’t anticipate a rise beyond the current rate, unexpected inflation spikes could change this scenario.

Final Thoughts

As a dedicated estate agent in Glasgow, I keep a close eye on these trends to ensure my clients are well-informed. Whether you’re buying your first home or looking to invest, understanding these market dynamics is crucial. For personalised advice tailored to your specific needs, feel free to reach out to me. Let’s navigate the property market together, ensuring you make the best decisions in these changing times.

Latest Articles