UK Mortgage Rates: What’s Happening and How It Could Affect You

30 Jan UK Mortgage Rates: What’s Happening and How It Could Affect You

If you’re a homeowner or planning to buy a house in the UK, you’ve probably heard that mortgage rates are changing. Some lenders have started lowering their rates, but experts warn this might not last. Here’s a simple breakdown of what’s going on and what it means for you.

What’s Going on with Mortgage Rates?

Recently, a few big lenders, such as Halifax and Leeds Building Society, announced cuts to their mortgage rates. For example, Halifax reduced some of their rates by up to 0.35%, while Leeds Building Society lowered some of theirs by 0.21%.

Headline rate reductions by lenders are not always applicable to you, as often these can only apply to certain loan to value or deposit levels and also on certain fixed length terms such as five years.

Over the past year we have seen the lowest rates on the market briefly dip to below 4% but currently sit just above that in the most competitive lending markets. Overall, however rates are slightly lower than the past 12-month average.

But there’s a catch: these lower rates might not stick around for long. Inflation is still a problem in the UK. In fact, it’s climbing again, driven by things like rising food and energy costs. Because of this, swap rates (the rates at which lenders buy in money) can be increased the. In addition, the Bank of England might not be able to cut rates further anytime soon.

Why Does This Matter?

The Bank of England’s base rate is a guide for the lenders. When the base rate is high, it can get more expensive for lenders to borrow money, which means they charge higher interest rates on mortgages. As mentioned above the base rate isn’t always what dictates the fixed rate market with swap rates the other big factor.

Currently, the base rate is 4.75%, and while some people hoped it might go down this year, market factors such as wars and elections mean we may now see fewer cuts than predicted….. if we see any at all.

For anyone with a mortgage, this could mean higher monthly payments, depending on the type of deal you’re on.

Who Will Be Affected?

• If You’re Looking to Buy Your First Home:
  Higher rates mean borrowing is more expensive, so you might be able to borrow less or face higher monthly payments. If you can afford to buy now it may not get better by waiting for market changes.
• If You Have a Fixed-Rate Mortgage:
  You’re safe for now. Fixed-rate mortgages lock in your interest rate for a set period (e.g., two or five years). But if your deal ends soon, you’ll likely face higher rates when you remortgage. This is a big concern for the 740,000 homeowners whose fixed-rate deals are ending in 2025. They could see a jump in their monthly payments.
• If You Have a Variable-Rate or Tracker Mortgage:
  Your payments will go up if the Bank of England raises its base rate again. These mortgages follow interest rate changes, so any increase hits you straight away.

What Can You Do?

If you’re worried about rising rates, there are steps you can take:

1. Check When Your Mortgage Deal Ends
   If you’re on a fixed-rate mortgage, find out when it expires. You can usually lock in a new deal up to six months in advance, so don’t wait until the last minute!
2. Talk to a Mortgage Broker
   A broker can help you find the best deal for your situation. They can also explain how much your payments might increase and what your options are.
3. Budget for Changes
   If you’re on a variable rate or approaching the end of a fixed deal, start planning now for potentially higher monthly payments.
4. Consider Fixing Your Rate
   If you’re worried about further increases and you’re not on a fixed rate, switching to a fixed-rate mortgage could give you peace of mind.

What’s Next?

Although some lenders have dropped their rates recently, rising inflation and wider market conditions could push them back up again. The best thing you can do is stay informed and plan ahead. Whether you’re buying your first home or looking to remortgage, being proactive will help you avoid surprises.

By keeping an eye on your mortgage and exploring your options, you can make sure you’re in the best possible position to handle whatever happens next.

Get in touch with our team to find out how we can help you secure the best possible deal for your mortgage.

Book a call with a member of our team: https://calendly.com/d/crcr-w23-hbv

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.