Deciding whether to fix your mortgage rate can be a tricky decision. Here we take a look at the current trends and whether interest rates will go up or down to help you decide whether you should fix your rate now
With mortgage rates on the decline and further rate cuts predicted in the future, many homeowners and first-time buyers are wondering: Should I lock in my mortgage rate now, or should I wait?
In this article, we will look at the latest trends in the mortgage market. We will also share predictions for future rates and help you make the most suitable choice for your situation.
The current mortgage market
Mortgage rates have been falling since reaching a peak earlier in 2024. Despite the Bank of England maintaining its base rate at 5% in September, numerous lenders now offer better fixed-rate mortgages.
Therefore, right now borrowers can secure better deals with reduced monthly payments.
Why are mortgage rates falling?
Many factors are causing the current decrease in mortgage rates:
1. Market expectations of rate cuts
Financial markets expect the Bank of England to lower the base rate furthermore. This is making lenders lower their mortgage rates ahead of time.
2. Increased lender competition
As the housing market gets more stable, lenders want new customers. This is driving mortgage rates even better.
3. Improving economic outlook
Inflation is still a bit above target, but the economic situation is getting better. There is a good chance of rate cuts in the future, which could help borrowers.
When will rates fall again?
Following the Bank of England’s first base rate cut in August 2024, experts say there will be more cuts in the next few years and the base rate might lower to 3% by 2026.
However, it is worth noting that these cuts will happen slowly. So, it is important to think about the benefits of waiting for better rates and the safety of fixing your mortgage rate now.
Should you fix your mortgage rate now?
Deciding if you should fix your mortgage rate now or wait depends on several things, such as your current financial situation and how much risk you can handle. Consider these important points.
- Current rate trends
Mortgage rates have fallen a lot from their peak earlier this year. Fixed-rate deals are more appealing now, as they offer better monthly payments. If you worry about rates going up again or want financial stability, locking in your mortgage rate now might be a good option for you.
- Chances of rate cuts
While more rate cuts might happen, they will be small and gradual. For many, fixing a mortgage rate now offers peace of mind and helps protect against sudden changes in the economy.
- Remortgaging opportunities
If your current fixed-term deal is almost over, now is a great time to consider remortgaging options. More competition among lenders means there could be more suitable deals available now.
- Avoid paying the Standard Variable Rate (SVR)
If you currently have a mortgage and are coming to the end of your deal, fixing a new deal will be more favourable than paying the SVR.
Other mortgage options
If you are okay with some risk and want to gain from potential future rate drops, tracker mortgages and variable-rate options may be another option. Right now, tracker rates are higher than fixed rates, but these could be lower in the future if we see further Base Rate cuts.
For people who want flexibility, there are tracker mortgages that do not have early repayment charge. This means if better fixed-rate deals come up, you can change without paying an exit fee.
Is a two-year fix or a five-year fix a better option?
Five-year fixed-rate mortgages are usually cheaper than two-year ones. They offer stable payments over time. If you want to avoid remortgaging often and protect yourself from future rate increases, selecting a five-year fixed rate mortgage might be the right choice for you.
Two-year fixes allow you to switch to a better deal sooner if interest rates fall or your circumstances change. You can also benefit from any house price rises, which can increase your equity and improve your loan-to-value ratio, making you eligible for better rates.
The importance of expert advice
Navigating today’s mortgage market can be difficult, whether you are a first-time buyer or thinking about remortgaging. Getting expert advice that fits your specific situation is important.
At Newhomes, our team of expert mortgage brokers can help you look at your options and find the most suitable deal for your circumstances.
For further advice on fixing your mortgage rate or waiting, visit Newhomesadvice.co.uk
