What now for mortgage rates in the UK? – Forbes UK Advisor


The ever-tightening cost-of-living crisis and soaring inflation (which stood at 7% in the 12 months to March) are fueling the likelihood of further interest rate hikes this year, putting further pressure on the monthly budgets of millions of mortgaged UK homeowners.

What’s going on with interest rates?

The Bank of England raised interest rates to 0.75% in March, which could add around £300 a year to a £200,000 2.25% variable rate mortgage. The Bank’s next interest rate decision will be on May 5.

Existing mortgages tied to bank rates, such as base rate trackers, will reflect the March hike, while the cost of many new fixed rate offerings will have already factored it in. This is the fourth increase in the bank rate since December 2021, when it was at just 0.1%.

Fixed rates 2 and 5 years

According to Trussle, our mortgage partner, an increasing number of homeowners are opting for longer-term fixed mortgages in a “stability offer”.

It said the original term of new fixed rate mortgages taken out by customers had increased by 17%, while Santander revealed that 55% of its new customers entered into 5-year fixed rate agreements last year , compared to 20% in 2016.

In fact, this week Halifax launched a new five-year fixed-rate mortgage that’s cheaper than its two-year fixed-rate equivalent. The five-year “no-fee” solution is priced at 2.82% for borrowers with a 40% deposit, compared to 2.94% for the same transaction over two years. Historically, you would pay more for the longer-term security that a five-year contract provides.

Why are interest rates rising?

The Bank of England’s Monetary Policy Committee (MPC) is using interest hikes as a tool to cool the economy and bring soaring inflation under control. And the consumer price index (CPI) measure of inflation jumped 7% in the 12 months to March 2022, marking its highest level in 30 years.

The Office for Budget Responsibility (OBR) had predicted that inflation would peak at 8.7% this fall, but that figure could now rise. This reflects both the uncertainty surrounding the Russian invasion of Ukraine, as well as the cap on UK energy prices which climbed 54% in April, driving up energy bills for millions of people. households.

The cap will rise again in October, when analysts expect at least an additional £500 will be added to the cost of a typical annual energy bill.

What are today’s mortgage rates?

With a frequently moving bank rate and inflation rate, it is difficult to keep track of mortgage costs, especially since they can change daily. An easy way is to use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.

To find out which offers are available at the current rates for the type of mortgage you are looking for, you will need to enter your personal criteria in the table below. Here’s what to do:

  • Indicate whether the mortgage must finance the purchase of a house or if it’s a mortgage for an existing property
  • Enter the property value and the mortgage amount you need. This will automatically generate a percentage which is known as your ‘loan to value’. The lower the value of your loan, the lower the mortgage rates available
  • Check the appropriate box if this is a purchase for lease or interest-only mortgage (you will need a repayment strategy in place for these transactions), or if you are looking for a mortgage to fund a shared ownership goods
  • Finally, filter your search by type of mortgage you want, for example a patch or a two- or five-year tracker. The filter is set to a full mortgage term of 25 years, but you can change it if needed.

What else should I know?

The mortgage offers offering the cheapest rates usually come with fees. You can choose to pay them upfront or add them to the loan. To account for the cost of fees, sort your results by “initial period cost” (in the “Sorted by” drop-down menu).

Alternatively, you can sort the results by initial rate, lowest fee, or monthly repayment – even by lender’s trailing rate the deal will revert to at the end of the term.

While mortgage rates change daily, the cheapest are reserved for larger deposits, typically 60% of the property’s value or more. And in any case, you will need sufficient income and a clean credit history to be accepted for a mortgage loan.

If you want to see what your monthly mortgage payments might look like under different scenarios while stacked against household bills, our mortgage calculator will do the sums.

While Trussle lists around 12,000 mortgage deals from 90 lenders – representing the vast majority of the market – some deals are sometimes available exclusively through a handful of brokers, so you might not see them.

When can I start a mortgage?

Mortgage offers from major lenders tend to last six months (as noted in our Best Lenders for Remortgage), although some lenders cap expiration dates at three months. It’s worth researching a new mortgage deal this far in advance, because you’ll be able to lock in a rate you’re seeing today – free of charge and with no strings attached.


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