In Blog

What’s going on with the Interest Rates and what it means for homeowners?

If you have been keeping an eye on the news of late, you may be asking yourself what’s going on with the mortgage rates?

We have seen multiple increases in the Bank of England’s Base rate since 2021, with it currently sitting at a 14-year high of 4%. Alongside this, we have naturally seen an increase in mortgage rates.

However, as we write this blog, at the beginning of March 2023, we are seeing the base rate continue to increase and the average cost of fixed rate mortgages continuing to come down from its peak.

How it works

The Bank of England sets the base interest rate, which influences the rates charged by banks and other financial institutions for borrowing and lending money.  When the Bank of England raises the base rate, it may become more expensive for banks to borrow money, and they may pass on this cost to their customers in the form of higher interest rates. Conversely, when the base rate decreases, banks may lower their interest rates.

When it comes to mortgages, fixed rates are predominately determined by future borrowing costs. Simply put, economists predict that once the Bank of England’s base rate has reached its peak the future cost of borrowing will lower. Hence, the predictions that mortgage rates may continue to fall in 2023. Whilst some predict rates may fall, it’s almost certain that we are not going to see a return to the low mortgage rates pre-pandemic any time soon.

Understandably this can be confusing for home owners and those wishing to purchase their first property, and you may have many questions.

Should you fix now or wait to see if the mortgage rates come down further? What’s going to happen to the markets this year?

We would agree that it’s a confusing time.

What this means for home owners

If your current rate is coming to an end it can be tempting to hold on that little bit longer. We would recommend that you get professional advice that is tailored to your specific circumstances.

Sometimes, when people chase rates they can end up paying more, so it’s important that you get an experienced view on this.

If we look at what’s happened over the last few years, none of us really saw Brexit coming, or the pandemic, and now we have the war in Ukraine. These national and world events affect the markets and we just don’t know what’s around the corner.

Research shows that 57% of mortgages coming up for renewal in 2023 were fixed at rates below 2%. As it currently stands, the average costs of a three-year and five-year fixes are at 4.89% and 4.43% respectively. This compares to highs of more than 6.50% in October.

If you have been on a fixed rate for the past 3-5 years then it’s pretty certain your mortgage payments are going to increase. And you have two choices, to stay at your lenders variable rate or fix in for another few years, which you can do with your current lender or shop around for a better deal.

Holding out to see what’s going to happen is a risky tactic, we just don’t know. Economists can make predictions, but then if another world event happens that can all change in a moment.

The Bank of England holds their next monetary policy committee meeting on 23rd March, and we will wait to see what they do with the rates next.

If you are concerned about your mortgage rates, or your rate is coming to an end within the next 6 months, get in touch to speak to one of our advisors.

Recent Posts

Start typing and press Enter to search

First Time Buyers GuideBringing peace of mind with Family Income Benefit