For all types of borrower, there’s positive news on the mortgage front. We’ve seen interest rates falling across the board this year due to the anticipation of, and then actual dropping of the Bank of England base rate, which the Monetary Policy Committee brought down from 5.25% to 5% at the start of August.
Although the base rate was held in September, with inflation now well under control at 1.7% and a fairly stable economy, more than three-quarters of economists recently surveyed by Reuters said they expect to see another rate cut this year, most likely at the next review, on 7th November.
In addition in early October, Andrew Bailey, the Bank of England governor suggested via the press that if the good news continued on inflation, that rate cuts could be more “aggressive”. However, this could be very dependent on the price of oil post the escalation of conflict in the Middle East.
What’s happened to mortgages recently?
As rates have come down this year and consumer confidence has been stimulated, the buying and remortgaging markets have picked up, which is starting to drive competition between lenders.
So, even though the base rate is currently 5%, as rates are forecast to fall over the next few years, lenders are able to offer some fixed mortgage deals for less than this rate.
Find out now, for free, what the latest mortgage rates you can secure with our online Mortgage Deal finder.
Bear in mind that a ‘good’ mortgage deal isn’t all about the interest rate. Fees, special deals, cashbacks, fixed-term tie-ins and redemption penalties can all play a part in what the ‘right’ deal is for your particular circumstances. That’s why it’s so important to talk over your options with a professional broker who can help you identify the best and most appropriate products for you.
What do we expect to happen with mortgages through the rest of 2024 and into 2025?
Lenders generally review their rates and products every three months, so it’s important to stay up to date with the market. Ongoing competition and a predicted base rate reduction before the end of the year should see mortgage interest rates continue to fall, albeit slowly.
This trend should carry on through next year, with Capital Economics forecasting the base rate will hit 4% by the end of 2025.
What should you do next?
If you’re buying to let, it’s essential to speak to a specialist broker, as around three-quarters of products are broker-only deals, meaning you can’t access them directly yourself. Be aware that the lowest rates and deals that seem the most attractive at first glance often have high redemption penalties and big product fees, so do check out all the aspects of each product. And make sure you talk through with your financial adviser or an experienced broker whether it’s better to tie in for a number of years or go for a variable rate that will give you more flexibility.
If you’re a first-time buyer - even if you’re only just starting to think about getting on the property ladder – go and speak to a broker even before you look for a property. An initial consultation will be free of charge, and they can not only help you understand how much you can borrow, but also all the costs associated with buying and the different buying options out there, such as shared ownership and the First Homes Scheme.
For those looking to trade up, the first step is to get a market valuation on your current home. While you can get a good idea via online valuation tools, it’s much better to get a more accurate bespoke appraisal from an experienced local agent. Then speak to a broker about your current mortgage to make sure you know about any redemption penalties and other costs, and to find out how much you could now borrow for your next purchase.
And if you’re not sure whether to move – or even if you are perfectly happy where you are – it may be well worth getting an up-to-date valuation on your property and remortgaging, given that rates rose rapidly over the last two years, but are now falling. And if you’ve gained equity since you took out your last mortgage, you may be able to significantly reduce your monthly payments by moving to a product with a lower LTV.
To discuss any aspect of your mortgage borrowing, you can get in touch with our experts via online chat, by completing our enquiry form or by calling 0800 144 4744.
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