What’s The Latest With UK Mortgage Rates? – Forbes Advisor UK

The Bank of England held its Bank Rate at 5.25% on 2 November in a move that was widely expected by market experts. The Rate was also held in the previous announcement in September.

Having undergone 14 consecutive rises between December 2021 (when interest rates stood at just 0.1%) and August 2023, the Bank’s most recent decision is further evidence that we may have reached the top of the rate-rise cycle. The next announcement falls on 14 December.

The autumn plateau has largely been made possible by cooling inflation. The latest figures from the Office for National Statistics show that inflation stood at 4.6% in October, having plummeted from 6.7% in September.

Rate-rise cycle

Mortgage costs first rocketed in the autumn of 2022 after former Prime Minister Liz Truss’ mini-Budget triggered market uncertainty and sent the pound crashing to historic lows. It caused mortgage lenders across the board to hastily pull deals, bringing them back to market at much higher prices.

While mortgage costs then underwent a correction, in the spring of 2023 lenders began putting up the cost of deals again as Bank Rate continued on its relentless climb in the face of soaring inflation.

As inflation has continued to cool, so the cost of fixed rate mortgages began to edge down from its peak. More recently, however as interest rates have been remained flat, many of the most notable rate cuts are being applied to the mortgage deals with the highest fees.

Average cost of popular deals

How much can borrowers expect to pay?

According to our mortgage partner Better.co.uk, the average two-year fixed rate deal across all borrower types* stands at 5.32%, with three-year deals averaging 5.24%. The average cost of a five-year fixed rate today is at 5.04%.

The average two-year tracker rate mortgage today is priced at 5.85%, with the best in this category priced at 5.39%.

A lender’s typical standard variable rate (SVR) stands at 7.78%, according to Better. This compares to around 4.78% in July 2022.

As of 1 November, there were 5,678 residential mortgage deals on the market, according to data provider, Moneyfacts. This is a slight rise on the 5,495 on the same date in October as lenders continue to reintroduce deals in a settling market.

Interest rates and mortgages

When the Bank Rate rises (or falls), it has an effect on the cost of mortgages.

There are an estimated 1.4 million homeowners (according trade body, UK Finance) on variable rate deals, such as trackers, whose payment will immediately either rise or fall if Bank Rate is adjusted.

If Bank Rate rose by 0.25 percentage points for example, a tracker deal priced…