Fixed mortgage rates are falling and could drop to below 4% in the New Year

PUBLISHED: 16th Nov 2022

The surge in mortgage borrowing costs in recent months has cased widespread concern and contributed to the fall in some house prices, but the latest figures show that fixed rates are continuing to all from the highs they reached following September’s disastrous mini- Budget

The Bank of England’s Monetary Policy Committee’s decision to increase the base rate by 0.75% to 3% earlier this month – the eighth consecutive hike since December 2021 – has seen tracker mortgage rates rise, but fixed rate deals have got cheaper.

Lenders including Platform, Yorkshire Building Society, HSBC, Halifax, Lloyds and Nat West have all reduced their fixed rates in the last week.

The average two-year fix, which peaked at 6.65% on 20 October, according to Moneyfacts, now stands at 6.28% while the five-year fixed rate, which peaked at 6.51% now sits at 5.07%.

The fall is owed in part to the fact that gilt yields, which dictate the cost of government borrowing and impact mortgage rates have dropped back to pre-mini-Budget levels.

To add, market projections for how high interest rates will go next year have fallen sharply with most expecting the base rate to peak at 4.5%, 1.5% lower than predicted in the wake of September’s mini-Budget.

Some mortgage brokers are therefore forecasting that five-year fixed mortgage rates will fall back to 4 percent in the New Year.

Mark Harris, Chief Executive of mortgage broker SPF Private Clients commented “fixed -rate mortgages pricing has been edging down over the past few weeks and if this continues, we would expect five-year fixes below 4% by early 2023.

“with lenders reporting that volume and activity is falling away thanks to higher rates, it is a trend we expect to continue”

“that desire for pipeline and the falling cost of funds will incentivise lenders to reduce rates further, which will be welcome news for hard-pressed borrowers”

David Phillip commented “we hope this direction of fixed rate pricing will put some borrower’s mind at ease, as this activity from lenders suggests that a certain level of base rate has already been factored into the pricing of fixed mortgage rates.

“as the money markets have improved over the last few weeks, this has meant that the cost of money has also reduced, and those savings are being passed back to the mortgage lenders.”

Several lenders have already lowered rates this month

Platform, the mortgage arm of the Co-Operative bank, has released new mortgage rates taking several of its five year fixed rates to below 5%

Yorkshire Building Society has reduced its rates by up to 0.38%, with its cheapest now 5.34% on a two-year fixed deal.

HSBC has cut its rates by up to 0.29%, thanks to cheaper borrowing costs, while Virgin Money has also reduced its five-year fixed rate.

Swap rates – the contract by which lenders ‘swap’ payments on fixed interest rates with variable ones to offset the risk of a fixed rate have fallen in recent weeks, indicating that lenders have tempered their views on Higher interest rates in future.

Bank of England Governor Andrew Bailey said the next rate rise is unlikely to be as high as the market has priced in and should settle mortgage rates. But all eyes will be on the Chancellor’s Autumn fiscal statement tomorrow, as it will influence whether the bank of #england increase rates again when the MPC next meets on December 15

If you are considering selling your home, call David Phillip FRICS on 01134 676 400 for a free market appraisal.

David has over 30 year’s experience selling properties in North and West Yorkshire which is key when selling your property in ‘unusual’ market conditions – add that to his local knowledge and you can be sure that you are using an Estate Agent you can trust to sell your home professionally, at the best price and as quickly as possible.

David Phillip Estate Agents, 86, Leeds Road, Bramhope, Leeds LS16 9AN w:davidphillip.co.uk

Covering Leeds, North Leeds, Bramhope, Pool-in-Wharfedale, Adel, Cookridge, Otley and Huby

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