Average mortgage rates have hit their highest since the end of 2023 as lenders respond to the prospect of a Bank of England interest rate rise today.
Despite reports major lenders have cut interest rates as the battle for mortgage customers hots up, Moneyfacts reports lenders’ repricing has resulted in fixed mortgage rates hitting a three year high. Comparisons on two-year fixed rates across Barclays, HSBC, Lloyds Bank, NatWest and Santander show interest rates are 0.44% higher on average versus the start of September.
The Bank of England’s monetary policy committee (MPC) meets today ahead of a crunch decision on interest rates with many expecting a 0.25% increase to 4%.
Average new mortgage rates have hit a three-year high, rising to 5.89%, up from 5.83% at the start of October. The last time rates were this high was last in November 2023 at 6.07% added Moneyfacts.
Average standard variable rate is currently 7.13% said Rachel Springall, finance commentator at Moneyfacts.
“Mortgage rates have risen to a three-year high as a result of lenders grappling to re-adjust rates amid swap rate volatility. Major lenders expect an imminent rise to the Bank of England Base Rate (BBR). Lenders could well pivot away from making aggressive rises over the coming weeks, but most of the damage is unlikely to unwind entirely. Lenders look at their margins very carefully, so it would be unwise to price deals too low when uncertainty remains. If the Monetary Policy Committee (MPC) indicate a calmer path on future rate expectations, fixed mortgage rates could reduce slightly before the year is over, as some may have overcompensated for swap rate rises
“A BBR rise would be the first hike in three years, yet with conflicts in the Middle East and between Russia and Ukraine remaining on a knife-edge, prolonged pressure on global inflation could worsen the outlook for UK interest rates.”
The latest inflation figures showed Consumer Price Index (CPI) from the Office for National Statistics (ONS) was 3.75% in October.
Despite this Enzo Mora, CEO and founder of The Mortgage Brain called on the BoE to “hold its nerve” and hold rates at 3.75%.
“While inflation remains well above the 2% target at 3.5%, the good news is that lenders including Barclays, Nationwide and Halifax have already repriced rates downwards this week. Meanwhile, softening house price growth is increasing affordability which can go some way to offsetting higher mortgage rates.
“Borrowers who are coming off fixed rates in 2027 will need to have discussions with a broker six months in advance to identify ways to manage their mortgage payments and lock in the lowest deals available at that time. The worst thing borrowers can do is narrow their options by burying their heads in the sand.
“Following the government’s confirmation of its new equity loan scheme, Your First Home, in the budget, developers have reported a modest increase in enquiries from first time buyers. While the scheme goes live next February with pre-registration at the end of the year, buyers with smaller deposits who want to take advantage of developer incentives this side of Christmas have several other mortgage products available now.”
