Fixed rate mortgage prices dip, but there’s ‘room for improvement’

The average rate for a five-year fixed rate mortgage has fallen below 6% for the first time in seven weeks, the latest data has revealed.

Mortgage rates have been soaring since the disastrous mini-Budget in September with the popular five-year fix climbing from 4.33% on 1 September to 6.32% on 1 November, according to data experts Monefacts.co.uk.

However, the figures show typical five-year fixed rates have today fallen to 5.95% – potentially signalling the start of a much-needed slowdown in prices.

Indeed, the average two-year mortgage, which hit a peak of 6.65% on 20 October, has now fallen to 6.13%.

Is this good news for borrowers?

Rachel Springall, finance expert at Moneyfacts.co.uk, said whilst homeowners may be breathing a sigh of relief, there’s still ‘much more room for improvement’.

She added: “As the average five-year fixed mortgage rate falls below 6% for the first time in seven weeks borrowers who paused their home ownership plans, or indeed parked the idea of refinancing, may now be tempted to scrutinise the latest deals on offer.

“However, it is worth noting that rates could fall further still, but there is no clear answer as to how quickly that may be.

“Borrowers may feel they have to be patient for a little while longer yet before they commit to a new fixed mortgage, or even wait until next year to see how the market recovers from the recent interest rate uncertainty.”

What will happen to mortgage rates now?

Following the publication of today’s data from Moneyfacts, mortgage brokers have predicted interest rates will continue to fall on fixed deals to somewhere around 4% to 5% over the next year.

Hannah Bashford, director of Devon-based Model Financial Solutions said: “Fixed rates have been slowly coming down for the past few weeks with some lenders making weekly adjustments. I believe that we will see fixed rates around the 4% to 5% mark over the next 12 months and for the base rate to increase in the first half of next year but eventually settling around 3% to 4%.

“I’d like to see rates settle to a more stable level of 3% to 4% long term as this is manageable for most people and more realistic. I still wouldn’t like to put someone on a five-year fixed rate over 5% as I think we will see rates come down.”

Paul Holland, mortgage broker at Chatham-based Henchurch Lane Financial Services predicted fixed rates would be closer to 5% come Christmas and the New Year.

He thinks the Bank of England will aim to keep the base rate in the 2% to 3% range long term, which would result in cheaper fixed rates in the 3% to 4% bracket.

!I imagine this will take 18 months to two years to achieve, once we go through a period of austerity and inflation is brought under control,” he said.

“We’ve seen several positive rate reductions over the past week with lenders like Skipton, Halifax and Accord being at the top of the competitive list for fixed rates.

“Lenders are still reluctant to price too keenly as it would result in an onslaught of applications they’ll struggle to service as lots of people have held off selecting a lender for their mortgage intentions throughout October and November.”