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How low can rates go?

Could fixed rates under 1% become the new normal for mortgages?

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Mortgage rates have been getting lower and lower over the past couple of years, but with rates under 1% appearing has the market finally bottomed out, or could mortgage rates go lower still?

Thinking of fixing your mortgage rate?

Enjoy fixed monthly mortgage costs for a set period, whatever happens in the financial markets

Compare fixed mortgages

What’s the cheapest rate at the moment?

HSBC are offering a two year fixed rate mortgage of just 0.99%. However, this comes with reasonably hefty upfront fees of £2,051 and is only available to those with at least a 35% deposit.

If you want to pay less upfront you can a get mortgage rate of 1.59% for two years from Accord Mortgages with an upfront fee of just £90.

Is the lowest rate the best?

You don’t necessarily want to aim for the lowest rate.  You should take into account all the fees and associated costs. Comparing with APRC or the ‘total cost’ is a good way to fully assess the cost of  a mortgage.

If you have an existing mortgage you should consider any exit or early repayment charges before remortgaging to make sure it’s worthwhile.

However if you are on your lender’s standard variable rate, it’s highly likely you could save a considerable sum by remortgaging to a market leading mortgage rate.

Why are mortgage rates so low?

The Bank of England (BoE) brought the base rate of interest to a historic low of 0.5% in the wake of the 2008 financial crash.

As it became apparent that the base rate wasn’t going up any time soon, mortgage rates gradually slid down to current levels, with variable rates of 0.99% appearing in 2014.

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It was widely anticipated that the base rate was going to be raised ever since Mark Carney was appointed Governor of the BoE in 2013. However, in the aftermath of the Brexit vote the base rate was halved to an unprecedented low of 0.25%.

While this was bad news for savers, it should bring mortgage rates even lower. Mark Carney issued a stern challenge to banks saying “the banks have no excuse not to pass this rate cut on.”

Could they go lower?

Possibly, many pundits think interest rates have room to slide, especially if Governor Mark Carney uses what he has referred to as “room for manoeuvre” in regards to taking rates even lower.

The fact that the best fixed rates are lower than variable rates is sign that many lenders believe rates may have further yet to fall, but without a crystal ball it’s impossible to guess what the future will hold.

It’s unlikely rates will fall much lower than HSBC’s 0.99%, it’s just likely we’ll see more mortgages with rates around this level, possibly leading to small competition with changes of 0.01% to jostle for the top slot.

Is now the time to fix a mortgage rate?

With mortgage rates at all time lows it would seem to be a good moment to fix a rate. However, if rates do fall further, you could be missing out on even better fixed rate deals.

But, it’s best to approach when to fix a mortgage rate with a long view and personalised perspective. In short think about what’s right for you and don’t get too stressed about market fluctuations.

Thinking of fixing your mortgage rate?

Enjoy fixed monthly mortgage costs for a set period, whatever happens in the financial markets

Compare fixed mortgages

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