The current average two-year fixed mortgage rate is currently level with the average five-year rate, with both at 4.52%, according to the latest figures from Rightmove. And, according to the company’s mortgage expert Matt Smith, the rate is set to come down further if the Bank of England goes ahead with an expected cut of 0.25% next week to take UK interest rate to 4%.
‘Over the last week, average mortgage rates have remained pretty flat in the build up to next week’s interest rate decision’, Smith explained.
“Expectations are currently set on a cut next week, and I expect lenders will use this moment as an opportunity to reduce mortgage rates a little further. Rate drops have been very slow and steady this year, but someone looking to take out a mortgage right now is likely to see a notable reduction in the rate they’d have been offered this time last year, particularly someone looking to fix for two years.
“With average two-year and average five-year fixed currently level, it would appear to only be a matter of time before the typical two-year rate is cheaper than the five-year equivalent.”
But Sarah Coles, head of personal finance at Hargreaves Lansdown, said the reductions may not last. She commented:
“[Fixed rates] had bumped up slightly in the recent past, so in the last couple of days some banks have been cutting them in anticipation of a Bank of England rate cut. Assuming the rate is cut next week, we could see some competitive deals emerge after the announcement.
“However, further out, we may see cuts slow in the coming weeks. This is partly because expectations haven’t changed as much recently and are increasingly priced in. It’s also because lenders don’t want to go too far or too fast, or people who have already agreed a rate in advance will abandon it in favour of a cheaper one.”
With affordability still ‘the number one issue’ for aspiring homeowners, Propertymark CEO Nathan Emerson said improved mortgage products will be ‘much needed and welcome news’.
He added:
“At a time when people are facing higher taxation connected with property transactions in many cases, ever more challenging deposits which are needed to enter the property market, and general cost of living increases, a wider variety of more affordable products is essential to help combat and further support consumers.
“It remains imperative that the cogs of the housing market continue to turn as it plays a crucial role in wider economic health.”
