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Mortgage rates continue to drop for more lenders

Our regular mortgage interest rate updates are for mortgage borrowers in the UK to help them understand current trends

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 20 February 2023

3 min read

Mortgage rates continue to drop for more lenders 

Last week we wrote about two new fixed rate deals under 4.0% which is a major step towards lower mortgage interest rates, especially fixed rates. Many borrowers have been left feeling stuck and unsure what to do with their mortgage as interest rates have continued to rise. 

Over the past 12 to 18 months the relentless interest rises from the Monetary Policy Committee (MPC) has left many home owners feeling vulnerable and uncertain about what to do. These are the first signals since 2020 that things could finally be settling down as predicted by many economists. 

Our regular mortgage interest rate updates are for mortgage borrowers in the UK to help them understand current trends. 

More choice for mortgages and deals 

We wrote last week about a handful of mortgage lenders in the UK who had released sub 4.0% fixed rate mortgages deals. This trend has continued to improve this week as we see even more lenders entering the space with better deals for borrowers. 

Most of the new deals are specifically for borrowers with large amounts of equity in their home or new borrowers with significant deposits. The majority of the new deals that are appearing are for people with 40%+ equity or those wanting to borrow under 60% of the value of their home. 

What does this mean for interest rates? 

There have been a number of economic experts suggestions recently that the interest rates in the UK should very soon stabilise. The economic outlook for the UK is still not bright yet, but there are signs that things are starting to slowly improve. It is now widely believed by a number of experts and analysts, that the Bank of England (BoE) will only increase the Base Rate once or twice more this year, to around 4.5% before it stabilises. 

Mortgage markets finally starting to stabilise 

One of the biggest issues for mortgage experts around the country has been securing a deal before it get pulled by lenders. Mortgage advisers have seen deals appear and disappear in days recently, compared to weeks and months previously. 

The seemingly catastrophic mini-budget in September 2022 during the reign of Liz Truss, led to movement in the mortgage market never seen before. We hope that this type of lending behaviour has now subsided for good, as it does nothing for borrower confidence. 

Should I fix my mortgage deal now? 

There are several key reasons why fixing your mortgage deal now might be a sensible and cheaper option for many borrowers. It’s important to make sure that you review your mortgage regularly, and especially for those already on the lenders Standard Variable Rates (SVR), or just about to go on to it. 

  • Current average Standard Variable Rate: 6.84% 

Any borrowers who are in this situation should almost certainly be speaking to a mortgage specialist or contacting their own lenders. It is also likely that mortgage lenders will increase their SVR’s again this year at the next Bank of England interest rate review. We expect that lenders Standard Variable Rates will increase to over 7%, which is the highest rate since 2008, where the average was 7.01%. 

Note: fixing your mortgage deal now could give you some security against potential future interest rate rises, if anything bad happens to the economy. We still can’t guarantee that the interest rates will stop at 4.5% so you should still be cautious, especially for those with high financial commitment. 

How to get a fixed rate mortgage 

It is still strongly recommended by many financial experts that you should speak to a qualified mortgage expert when reviewing your mortgage. Most mortgage advisers will be able to quickly identify which deals are best for you and how to proceed. 

You can also learn more about this mortgage type in our guide ‘Everything you need to know about fixed rate mortgages’.

Resources – Support for Mortgage Interest (SMI)

Bank of England – Interest rates and Bank Rate

Statista – Average mortgage interest rates in the UK (March 2000-January 2023)

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