Lenders offer reduced fixed-rate mortgages

Accord Mortgages and HSBC have been amongst the first of lenders to reduce their fixed-rate mortgages on some of their products. 

• HSBC have reduced their rates on fixed-rate mortgages by 0.11% and up to 0.22% on tracker mortgages.

• Accord Mortgages has lowered select rates, including those which target first-time buyers, by up to 0.53%. 

• Virgin Money has also cut rates to 5.49% based on a five-year fixed rate.

• Santander has reduced some of their fixed-rates.

Interest rates for mortgages infamously soared after the former Prime Minister Liz Truss, along with Chancellor of the Exchequer Kwasi Kwarteng, announced a mini-budget which resulted in a backlash from the Bank of England (BoE).

Now, while many lender’s rates for fixed-rate deals remain around 6-6.5%, there is at least a crack of hope for homeowners and first-time buyers seeking a better deal. But what do the new lower rate deals offer buyers and are rates going to rise again?

The UK is still fighting inflation

As the central bank attempted to quash rising inflation as the Great British Pound plummeted in value, interest rates rose, leaving people with tracker mortgages and variable-rate mortgages in the lurch. 

Some property owners saw a £600 a month increase to their mortgage repayments as others scrambled to lock in a fixed-rate deal which at least provided some predictability.

As inflation stands at 10.1% as of October 31st, many people are nervously wondering whether rates will have to rise again to tame it. 

Interest rates are still likely to rise… but maybe not by as much 

Since Jeremy Hunt announced the new government’s plans to reverse the previous mini-budget announcement, things have started to settle. 

The pound has risen to its highest levels since Kwasi Kwarteng’s announcement, sparking stability and confidence in the markets. As of October 31st, sterling has stabilised somewhat against the US dollar and stands at 1.155%.

Interest rates on UK Government debt have also decreased to the levels they were at before the menacing mini-budget.

Consequently, the expectation of the BoE base rate sliding to 6% in 2023 has been scaled back to less than 5%. In fact, The Financial Times reports that traders are betting on rates peaking at 4.75% in the summer of 2023.

While that’s not brilliant news for those seeking a lower-rate mortgage in the near future, a lower rate can be locked in now with a select handful of UK lenders. 

Waiting for rates to increase could result in first-time buyers paying even higher rates of interest, so those in a position to buy now might want to seek advice from a mortgage broker sooner rather than later. 

MPC members to raise the base rate by 0.75%?

November 3rd will bring a new monetary policy meeting whereby the nine members of the MPC will vote and decide on how high the BoE should raise the base rate next.

The base rate currently stands at 2.25%, though many believe this will rise sharply to 3%, with subsequent, yet smaller rises into 2023. 

If true, the 0.75% rise would be the biggest in 30 years. 

What next for the mortgage market?

The government’s autumn statement on November 17 will focus on showing how debt will fall as a share of gross domestic product in the medium term.

Until then, the BoE governor Andrew Bailey has warned that the central bank will be “flying blind” because the government has not made decisions on the public finances yet.

Rishi Sunak, in a bid to please voters, could delay fiscal tightening until after the next election. If that happens, the BoE may decide to take matters into its own hands and continue to press on with rises to the base rate.

If they do, tracker mortgages, which follow the BoE base rate as a guide, will increase and fixed-rate mortgages are likely to follow suit. 

Therefore, many who need to refinance over the next 18 months could face much higher mortgage bills. 

Low rate deals can be found with a broker

The average interest rate on a fixed two-year mortgage in October 2022 is 6.49%, 6.35% on a five-year deal, and 5.63% on a 10 year fixed deal. 

However, lower rates can be found with a small number of lenders, though each one has their own criteria that you’ll need to meet in order to qualify for the cheaper mortgages. 

• Virgin Money for example, may require as much as a 25% deposit for their lowest fixed-rate mortgage at 5.49%, as well as a £1,295 upfront fee.

• Suffolk Building Society are offering eligible customers interest-only mortgage rates as low as 3.85% if they have a 20% deposit and an arrangement fee of £699.

• Then there’s HSBC. They’ve reduced the rates on selected five-year fixed mortgages to 5.37%. 

• Accord Mortgages, are also stepping up by reducing their fees on selected mortgages by up to £500.

Securing the lower rates with the small number of lenders that are offering them needs to be taken with caution. Like all lenders, the above will have their own criteria that you’ll need to check you’re eligible for. 

There’s no use applying to one of these elders without knowing whether or not you’ll be approved. 

You could waste your money, time and end up getting rejected and damaging your credit score, so check your eligibility with a mortgage broker. 

Think about whether a fixed-term mortgage is best for you

Longer-term mortgages are also something to consider with the help of a mortgage broker. A longer term, of say 35 years rather than 25 years, spreads the cost of the mortgage so that monthly repayments are lower.

The disadvantage is the longer your mortgage term, the more interest you’ll end up paying and therefore, the more expensive the loan will be overall.

It’s not a mortgage broker’s job to judge you 

Take the brokers at The Mortgage Hut as an example. They’re real people who understand the up and down nature of life. Bad credit? You won’t be judged. A gap in employment? They’ve seen that countless amounts of time. 

Asking for advice is the first step to securing a good rate for your mortgage, whether you’re a first-time buyer, home mover or a buy-to-let investor. 

They can show you a list of lenders that are suitable for your circumstances and explain the pros and cons of each based on what you’ve told them you need from a mortgage and what your long-term plans are for your property. 

Find the right mortgage

Our dedicated mortgage specialists are here to help you. They’re not pushy salespeople but qualified advisors who know the current market and study the trends as they happen. 

Keeping you up to date is important, so when you come to The Mortgage Hut for advice and help with your mortgage, you’ll have access to our app so you’re always in the loop with the progress of your application. It makes the process easier for you and ensures our brokers can give you a better service.