Mortgage rates are finally falling. But how low will they go, and is it worth waiting for an even better deal?
After months of rising costs, there’s finally some relief in sight for mortgage holders. The recent Bank of England base rate cut to 5% has triggered a wave of reductions from major lenders like Santander and Barclays, offering a little hope for those facing the end of their fixed-rate deals.
Fixed Rates Tumble
Leading up to the Bank of England announcement, lenders had already begun slashing fixed-rate deals in anticipation of a cut. Now, with the cut coming sooner than expected, experts predict further reductions in the coming weeks.
According to Moneyfactscompare, the average two-year fixed-rate has dropped to 5.76%, while five-year fixes are sitting at 5.37% – a noticeable difference from just a few weeks ago.
How Low Could They Go?
Brokers are optimistic about future rate cuts, in a roundup by the Daily Mail. Ranald Mitchell of Charwin Mortgages believes lenders are actively pushing rates down. With the Bank of England expected to make another cut before the year’s end, some experts suggest that by 2025, the best rates could be nearly 2% lower than today’s average.
Nicholas Mendes, a broker at John Charcol, predicts borrowers with a 60% loan-to-value ratio could secure a five-year fix as low as 3.5% by early 2025. Those with an 80% loan-to-value ratio could see rates around 4%.
Trackers React Quickly
As expected, tracker mortgages, being directly linked to the base rate, have seen the most immediate impact. Borrowers on these mortgages could see an average annual saving of £336, according to UK Finance.
The Tracker Temptation
While the prospect of lower monthly payments is enticing, experts advise against rushing into a tracker mortgage solely for potential savings.
Justin Moy of EHF Mortgages points out that tracker deals are currently more expensive than fixed-rate options. With a typical difference of 0.5% to 1%, it would require two to four further base rate cuts for trackers to match current fixed-rate products.
Fixed Rates Offer Stability
For those seeking predictable monthly repayments, fixed-rate deals remain a solid option. Craig Fish of Lodestone Mortgages cautions against rolling onto a standard variable rate (SVR) in anticipation of further rate drops. With the average SVR at a high 8.16%, waiting could prove costly.
Seek Expert Advice
With mortgage rates having fluctuated significantly, securing the best possible deal is crucial. Consulting with a mortgage broker can provide valuable guidance and help you navigate the various options available. Whether you’re remortgaging or buying a new home, expert advice can save you thousands in the long run.