Mortgage rates begin to drop, and could drop further for UK homeowners
Those with or looking to get a mortgage in the near future will be pleased to know that the average 2 and 5 year fixed-rate mortgages have dropped in the last couple of weeks and may drop further still in the new year.
The data from MoneyFacts shows at the start of November fixed loan rates dropped to 6.35% and 6.12% respectively, when they were previously at 6.46% and 6.3%. The average rate in the last week was reported at 5.95%.
The bank of England increased its base rate by 0.75 points to 3% in mid-November, which usually doesn’t mean mortgage rates come down as it determines the cost of borrowing, however this is not the case this time due to a few factors.
The first factor being that the cost of lending shot up after September’s mini-budget, so the financial markets predictions for where the base rate would be next year also increased, so lenders increased the costs of their loans. Now, the base rate is forecast to are come down, so lenders are more relaxed about future costs.
Another factor is due to the increased amount of mortgage applications that lenders received after the mini-budget as borrowers tried to get the best deals resulted in some banks and building societies upping their rates to help reduce their workload.
A final and more technical reason for the decrease is the swap rates. Swap rates are used by banks to predict the path of the base rate. As swap rates are coming down, fixed rates are coming down too. This is a good sign that the base rate may not rise as much as markets first predicted. Homeowners and prospective buyers can now breathe a sigh of relief, as the downward trajectory of mortgage rates are still set to decrease further because of this.
This good news makes buying a new build home even more of a viable investment, whether it is to live in or to add to your own property portfolio. You can see all our available sites and developments here.