THE average mortgage rate has dipped below 5% again ahead of the Bank of England’s base rate decision this week, with experts saying it’s a “good time for borrowers to lock into rates now”.
The Moneyfacts Average Mortgage rate is 4.99% in November after a slight rise to 5.01% in October, from 4.99% in September, data shows.
UK mortgage rates rose rapidly in the aftermath of the 2022 mini-Budget, and were driven even higher by a succession of base rate increases in 2023.
Since then they have generally trended downwards – but the market is still prone to fluctuation.
With another cut possible this week, it could mean rates come down even further – or soar upwards again in the result of a difficult Budget later this month.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “Borrowers will no doubt be thrilled to see mortgage rates drop, particularly the millions due to come off a cheap fixed rate before the year is over. It is a notable milestone to see the Moneyfacts Average Mortgage Rate drop below 5%, although it remains uncertain on how long this can be sustained.
“Fast forwarding to the present day, mortgage rates are much lower thanks to base rate cuts and swap rate movements. However, sticky inflation makes it less likely for the Bank of England’s Monetary Policy Committee to unanimously agree on making more cuts.
“In addition, uncertainty remains surrounding what may be revealed within the Budget. That said, fixed rate mortgages do not always bend to the will of base rate cuts, and instead are more intrinsically linked with swap rates. Borrowers keen to refinance would be wise to seek advice to secure a new deal and not wait around for more rate cuts by the Bank of England.”
Brokers and financial experts urged borrowers to lock into a deal now before the Budget later this month.
Omer Mehmet, Managing Director at Welling-based Trinity Finance, said: “Lenders have targets to hit and a lack of activity in the property market is now a cause of concern. Rates are being cut as a result and it’s starting to feel like a mini-rate war is raging.
“With the Budget looming, now may be a good time for borrowers to lock into any rates now in case the Budget sends them spiralling upwards again.”
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said the 5% mark is “symbolic”.
She added: “Lenders are really trying to get the market moving and this is being reflected in the average mortgage rate dropping below the symbolic 5% mark. After a quiet few months for lenders, borrowers are really starting to reap the benefits now.”
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said the market is holding steady – “for now”.
He continued: “It seems the mortgage market has finally realised that the Bank of England isn’t planning an eternal reign of terror. Inflation holding steady may be a contributor to recent cuts.
“A more benign inflation outlook means the financial plumbing, specifically the Sterling Overnight Index Average (SONIA) swap rates that dictate fixed mortgage pricing, is flowing cheaper. For now at least.”
Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, said he expected the Bank of England to cut rates this week.
He added: “This is good news for homeowners and buyers, and also indicates the market thinks the Bank of England may cut rates this week. If that happens, it could be a momentous shift for the economy. A cut in interest rates would not just help homeowners, but could dig Rachel Reeves out of a hole.
“Borrowing costs for government debt are the third biggest outgoing for the Chancellor, only after health and welfare. If this is significantly reduced, she may opt not to increase income tax, which would have a real drag on the UK economy. In effect, it’s now Andrew Bailey deciding on how much of your pay packet is taxed.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, was sceptical of the figures.
He continued: “This average mortgage rate for me doesn’t accurately represent the mortgage rates the vast majority of borrowers will qualify for, especially if this excludes adverse and specialist schemes.
“Most borrowers will be able to achieve a rate around 1% less than this average rate, and with 2-year fixed deals seeing the greatest reductions over the last few weeks, I don’t really see how this average rate represents much of the mortgage market at the moment.”
Photo by Ralph Hutter on Unsplash
