close
close

What’s the latest on UK mortgage rates? – Forbes Advisor UK

The Bank of England kept the bank rate at 5.25% in May, as widely expected. It was the sixth consecutive interest rate freeze since interest rates rose to their current level in August last year. Interest rates had previously experienced fourteen consecutive increases (between December 2021, when they were just 0.1%, and last August).

The next interest rate announcement by the Bank’s Monetary Policy Committee (MPC) will take place today (June 20) at noon. The European Central Bank cut interest rates on June 6, which could theoretically make a cut by the Bank of England more likely. But the July 4 general election could postpone any cuts until the MPC’s next meeting in August.

What happens to inflation?

The recent plateau in interest rate increases has been made possible by the continued cooling of inflation. The latest figures from the Office for National Statistics show that inflation fell from 2.3% in April to 2.0% in May – the Bank of England’s official target. As recently as September last year, this figure was 6.7%. The recent decline in inflation had already prompted lenders to cut back on mortgage costs.

Free mortgage advice

Trussle is a 5-star Trustpilot rated online mortgage adviser who can help you find the right mortgage – and do all the hard work with the lender to secure it. *Your home can be repossessed if you fail to make your mortgage repayments.

Free mortgage advice

Better.co.uk is a 5-star Trustpilot rated online mortgage adviser that can help you find the right mortgage – and do all the hard work with the lender to secure it. *Your home can be repossessed if you fail to make your mortgage repayments.

Average cost of popular deals

But how much are borrowers paying now? Rates vary depending on the lender and the size of the deposit, but according to our mortgage partner Better.co.uk, the average cost of a two-year fixed rate mortgage, for all types of borrowers*, is currently 5.75%. The average cost of three- and five-year deals is 5.00% and 4.78%, respectively.

Today’s top two- and three-year fixed rate deals are priced at 4.75% and 4.49% respectively. Today’s best five-year deal costs 4.28%.

The average two-year mortgage rate is priced at 5.75%, while the best in this category costs 5.39%.

According to Better.co.uk, the typical standard variable rate (SVR) is currently 8.12%. Compared to just 4.75% in July 2022. The SVR is usually what borrowers return to once their deal, such as a fix or tracker, has expired.

In terms of mortgage availability, there were 6,632 residential mortgages on the market at the beginning of June, according to data provider Moneyfacts. The number has risen steadily in recent months. For example, on February 1, the number of available deals was 5,787.

Below you will find a live table of the mortgage offers available today. Below you will find guidelines for using the table.

What influence does the bank interest rate have on mortgages?

When bank interest rates rise or fall, this affects the costs of mortgages.

There are more than a million homeowners (according to trade body UK Finance) who have variable rate deals, such as trackers, where the payment will immediately increase or decrease when the bank rate is adjusted.

For example, if the bank rate were to rise by 0.25 percentage points, a tracker deal priced at 5% would rise to 5.25%. This increase would add an extra £30 per month to a £200,000 loan taken out over 25 years, with monthly repayments rising from £1,128 to £1,258.

Fixed rate borrowers where the interest rate is fixed are protected against changes in bank interest rates. However, when their deal expires – as will be the case for around 1.6 million borrowers over the course of 2024 – new deals will be more expensive.

Our Mortgage Calculator allows you to calculate the monthly costs of a mortgage at different interest rates.

What about house prices?

The latest data points to a flat property market as potential buyers and offenders settle into a more stable interest rate environment, but with prospects of cuts ahead.

Halifax’s latest house price report (published on June 7) showed that average property values ​​fell by a marginal 0.1% in May, after rising by an equally marginal 0.1% in April. Annual growth rose to 1.5% in May, compared to 1.1% in April. Halifax estimates the cost of an average home in May at £288,688, up from £288,781 the month before.

Nationwide’s latest house price report (published on May 31) found that prices rose 0.4% in May, compared to a 0.4% decline in April. The annual rate of increase was 1.3%, compared to 0.6% the month before. The lender attributes the slight recovery in the real estate market to solid wage growth and cooling inflation. It estimates the cost of an average home in May at £264,249, up from £261,962 in April.

Rightmove also reported that asking prices were flat in June, only £21 (or 0%) higher than in May. Prices increase by 0.6% every year. However, activity has improved: sales increased by 6% in June compared to last year and demand increased by 5%. The average house for sale on Rightmove cost £375,110 in June, up from £375,131 in May.

Why did the interest rate hike cycle happen?

Interest rates underwent fourteen consecutive increases between December 2021 and August 2023, as the Bank of England’s Monetary Policy Committee (MPC) used rate hikes to cool the economy and curb rising inflation.

Annual inflation, as measured by the consumer price index (CPI), peaked at 11.1% in October 2022. By May 2024, it had fallen to 2.0%, the Bank’s official target.

One of the main causes of runaway inflation was the cost of energy bills. Energy regulator Ofgem’s energy price cap was a whopping £4,279 in the first quarter of 2023 (although government intervention had applied a temporary cap of £2,500).

The current limit (effective from April 1, 2024) is £1,690 and is 12% lower than the previous £1,928 which applied between January 1 and March 31, 2024. Ofgem has confirmed that the limit will increase by a further 7% will drop. to £1,568, where it will remain for the next three months until September 1.

The energy price ceiling is the quarterly amount that represents the annual bill of an average household that pays monthly by direct debit (although actual bills are always determined by consumption).

What mortgage deals are available?

Keeping track of mortgage costs can be a challenge, especially when rates can change daily. A simple way is to use our mortgage tables, powered by Better.co.uk.

To find out what offers are available at current rates for the type of mortgage you are looking for, enter your personal criteria in our mortgage table (above). This is what you need to do:

  • Select whether it is a mortgage finance a house purchase or if it’s a remortgage for an existing building
  • Enter the property value and the mortgage amount you need. This automatically generates a percentage known as your ‘loan to value’. The lower the value of your loan, the cheaper the mortgage rates available
  • Check the relevant box if it is a buy-to-let or interest-only mortgage (these deals require a repayment strategy), or if you’re looking for a mortgage to get a shared ownership property
  • Finally, filter your search by the type of mortgage you want, for example, a fix or tracker for two or five years. The filter is set to a full mortgage term of 25 years, but you can change this if desired.

What else should I know?

Mortgage agreements with the cheapest rates usually involve costs. You can choose to pay this in advance or add it to the loan. To take the cost of the benefit into account, sort the results based on “initial period cost” (in the “sorted by” drop-down list).

Alternatively, you can organize the results by initial interest rate, lowest fee or monthly repayment – ​​even based on the lender’s subsequent rate to which the deal returns at the end of the term.

The very cheapest are reserved for larger down payment amounts, usually 60% of the home value or more. And in all cases, you’ll need sufficient income and a clean credit history to be accepted for a mortgage.

If you want to see what your monthly mortgage payments could look like in different scenarios, as they’re covered by household bills, our Mortgage Calculator will crunch the numbers.

When can I start a transfer?

Once issued, mortgage offers are usually valid for six months, although some lenders will honor offers for up to twelve months. If you want to refinance your current home, this means that you can lock in a rate today – free of charge and without obligation.


How are the average mortgage costs calculated?

*Average mortgage costs may vary by source depending on how data is collected. Better.co.uk’s data reflects the average cost of a fixed rate mortgage recommendation made over the last seven days and provided to applicants by a panel of more than 100 lenders.

The data includes remortgages and purchase loans, but excludes SVRs, adverse credit, self-build and shared ownership. Data is collected at the end of each working day.

Better.co.uk targets applicants with a good credit history. Lower loan-to-values ​​(less than 85%) represent a significant portion of business, which can translate into cheaper loan rates.

The average fixed rate cost may therefore appear lower than some other rates quoted on the market.

Related Posts