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Could mortgage rates be falling?

Confidence in the property market is returning like wildlife this spring as mortgage rates continue to fall, despite the Bank of England raising its base rate once again. Because of this, house prices appear to have picked up since February, according to Halifax’s* latest data analysis.

What is happening to mortgage rates?

The property search portal, Zoopla recently revealed that mortgage rates are falling and product choice is increasing as 2023’s market stabilises. They found that a total of 4,341* different deals are currently available, a notable increase since January where the number was at 3,643. * This marks the first time that product choice has risen above 4,000 since August of 2022. *

Moneyfacts' UK Mortgage Trends Treasury Report* data also unveiled that the average interest rate on both two-year and five-year deals has also dropped for the third month in a row. The typical two-year deal is now 5.44%*, a fall from 5.70%* in January. While interest on five-year fixed rate mortgages has fallen to 5.20%, down from 5.63%.*

These recent falls have put the cost of both deals back where they were in October 2022, despite the Bank of England raising its bank rate by 1.75%* within the same period.

What does this mean for the market?

Since the appointment of Jeremy Hunt and with Rishi Sunak becoming the new prime minister, markets began to settle and the average cost of fixed-rate mortgages has been continuing to fall from its recent peak. This can only mean good news for those looking to buy or sell in 2023.

Halifax’s latest data analysis found that the average price of a property in the UK sat at £285,476 during February this year, a notable improvement on January’s average of £282,360. *

This is a positive sign since prices fell five times in the final six months of 2023, before stabilising in January, when prices rose by 0.2%* on average.

Kim Kinnaird, of Halifax, noted “Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December.” *

House prices are down by about £8,500*, or 2.9%,* on the August peak but remain almost £9,000* above the average prices seen at the start of 2022 and are still above pre-pandemic levels.” Kinnaird added. *

Will mortgage rates continue to fall?

How interest rate changes will affect mortgage deals depends on which type of mortgage you have.

For those on a fixed-rate mortgage, rate rises won’t be a concern for the time being as the rate would have been fixed at the time the mortgage was taken out.

However, for those with a fixed-term that is due to end soon, borrowers will automatically be moved to their lender’s standard variable rate (SVR), which means interest on the mortgage is likely to rise in line with increased interest rates.

Those on discounted tracker mortgages will likely see the interest on their mortgages rise to reflect the current interest rates, as most lenders will pass rate rises onto customers.

However, under current circumstances, a rate hike may not result in higher mortgage rates, as lenders have priced in the point increase already, and therefore are expected to see further reductions.


Moneyfacts UK Mortgage Trends Treasury Report*


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