If you are in the process of looking at a mortgage you may be forgiven for feeling slightly dizzy at the moment.
Last summer mortgage rates soared to a high many homeowners may never have experienced before, with some deals bearing rates of up to 7%.
Fast forward to the start of 2024 and mortgage rates began falling, with a handful of lenders even managing to lower prices to below 4%.
Now, in February, we have started to see some lenders bring prices back up again. First Nationwide announced it was increasing rates on fixed-rate deals, then Santander, TSB and Coventry Building Society followed.
But others have also been dropping prices…Confused? Of course you are.
In a nutshell, it would seem, where mortgage rates are concerned things are very unpredictable at the moment.
This is all very well, but if you are due to remortgage or are in the process of taking out a mortgage to purchase a house you may feel a little disorientated about prices.
Mortgage rates: The facts
Let’s start with the solid facts. Today, (Wednesday, 28 February) the average two-year fixed residential mortgage rate is 5.74%. This is up from an average rate of 5.73% yesterday, according to Moneyfacts.
Meanwhile, the average five-year fixed mortgage rate is 5.32%. This is up from an average rate of 5.31% yesterday.
This time last week the average two-year fixed rate was 5.71% and the five-year fix was 5.29% said Moneyfacts. This shows you fixed rates are edging up slowly.
In the meantime, experts are predicting the Bank of England will reduce interest rates in the summer.
Finally, the Chancellor Jeremy Hunt is due to announce the Spring Budget on 6 March (next Wednesday) and we will be eagerly awaiting news of stamp duty cuts – which may reduce costs for some buyers – and 99% mortgages.
But, how do you apply these facts to your house purchase or remortgage needs?
Wait and see or dive in?
When rates are unpredictable it can be tempting to wait for things to settle. If you are a homeowner about to exit a deal then you may feel tempted to do just this – a process which may mean you revert to your lender’s standard variable rate (SVR).
SVRs are currently averaging 8.17% according to Moneyfacts, so the leapin your repayments will be significant.
Michelle Lawson, director at Lawson Financial, speaking via the Newspage agency, had some advice. “Lenders being all over the place with rates are giving mixed messages to the public and causing an unnecessary air of uncertainty,” she said.
“The truth and facts are, if your mortgage is coming up for review in the next six to seven months or you are looking to buy, speak to a good broker now.
“They will secure a product now and this will be your worst-case scenario. If rates come down, we can change them where time permits. It is a win-win outcome for the borrower.”
For buyers, you may be wondering whether to hold off on your purchase.
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, said via the Newspage agency: “We’ve experienced a stable month, mirroring last month’s performance, despite the half-term break. However, we urge our clients to continue as usual and not to delay in anticipation of future rate cuts.
“We’re closely monitoring rates with our recommended lenders, and should opportunities arise and time permit, we’ll swiftly switch them to more favourable rates available with the same lender. This takes away their stress.”
