This week, mortgage rates have shown little change, maintaining the status quo for those looking to secure a new home loan. The average rate for a two-year fixed mortgage remains at 5.89%, while the five-year fixed rates have seen a slight decrease from 5.39% to 5.36%. This stability follows the Bank of England’s decision to maintain the interest rate at a 16-year high of 5.25%.

Despite the unchanged average rates, there’s a growing trend among major lenders to inch rates upwards, a signal that could worry future homeowners. HSBC, for instance, has already raised some of its fixed-rate deals. Smaller lenders are also withdrawing their higher loan-to-value deals, hinting at imminent price adjustments.

The Broader Economic Context

The Bank of England’s consistent interest rates have broader implications for mortgage seekers. Experts now predict that the Bank will not reduce the base rate until possibly August or September, rather than in June as previously hoped. This anticipation affects lenders, who are adjusting their rates to reflect the uncertainty.

Adding to the complexity, the upcoming General Election and persistent inflation are making significant rate cuts less likely in the near future. This has resulted in a slight increase in the actual interest rates paid on new mortgages, which rose by 1 basis point to 4.74% in April.

Impact on Homebuyers

Young homebuyers face particularly challenging conditions, with a noticeable rise in mortgage terms extending beyond the state pension age, especially among those under 30. This trend highlights a growing desperation among younger generations to own homes, albeit at the risk of their financial freedom in retirement.

Mortgage approvals have dipped slightly, with new mortgages and remortgages both seeing a decrease in numbers last month. This suggests a tightening market, with fewer people able to secure mortgage approvals under the current economic conditions.

Rates Across Major Lenders

• HSBC: The lowest five-year fixed rate now stands at 4.48%, a slight increase from previous weeks. Their two-year fixed rates have also risen, currently at 4.86% with a £999 fee.
• NatWest: Offers a 4.32% five-year deal online, but rates jump significantly after five years. Their green mortgage product for energy-efficient homes is slightly higher at 4.42%.
• Santander: Their five-year fixed rates are at 4.38%, with a two-year fixed rate slightly higher at 4.80% for a 60% loan-to-value ratio.
• Barclays and Nationwide: Both lenders offer competitive rates with Barclays’ five-year fixed rate at 4.34% and Nationwide’s starting from 4.59%.

Looking Ahead – Will Mortgage Rates Decrease?

The expectation for 2024 is mixed. Although there was hope for significant rate cuts as inflation eased, the reality looks different with only minimal reductions anticipated. This could affect the nearly 1.6 million borrowers whose fixed-rate deals are set to expire this year, potentially facing higher costs on renewal.

What Should Prospective Homebuyers Do?

For those uncertain about the best course of action, locking in a rate up to six months ahead of a new mortgage term remains a wise choice, with the flexibility to switch should better rates emerge. Additionally, new products like the one from Yorkshire Building Society, which allows first-time buyers to step onto the property ladder with just a £5,000 deposit, are also worth considering.