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Mortgage rates are going up

With the last fixed rate deal below 1% disappearing from the market, is now the time to fix?


Lenders have been pulling their best mortgage rates in advance of the much anticipated Bank of England base rate rise.

And with the last fixed rate below 1% disappearing from the market, is time to fix your rate?

Is it time to fix your mortgage rate?

A fixed rate mortgage can keep your costs at a set level for as long as ten years.

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What’s the base rate? The base rate of interest is set by the Bank of England to manage the economy and used as a benchmark for all other interest rates across the market, especially mortgage and loan rates.

The lowest ever mortgage rates

Mortgage rates have been steadily falling ever since the Bank of England (BoE) took the base rate down to 0.5% in 2009.

Back in 2014 HSBC took mortgage rates below 1% for the first time, offering a two year variable rate deal for 0.99%. Ever since, there have always been a few sub 1% rates topping the mortgage tables.

average mortgage rates

Average mortgage rates have been steadily declining for years, other than Standard Variable Rates (SVR) which have been creeping up after the massive 2009 drop. Source: Bank of England database.

What is happening to mortgage rates?

Many lenders are quietly pulling their market leading rates from the market, in anticipation of a BoE rate rise.

However, there’s no need to panic, rates are unlikely to skyrocket immediately, as the BoE rate rise likely to only be a return to 0.5% (more on this below). So rates will likely creep, rather than race, up.

That said, we’re very much in uncharted waters and this will be the first rate rise in over 10 years, so without a crystal ball it’s impossible to know exactly what will happen.

The end of low rates – is it time to fix?

As of 13 October 2017 the last fixed rate below 1% disappeared, with the lowest fixed rate now starting at 1.09% for borrowers with at least a 40% deposit.

Variable and tracker rates starting from 0.89% remain available, but with the direction the market is heading, putting your mortgage on a variable rate could be risky.

Also, bear in mind, most of the deals with the lowest rates also come with some reasonably hefty booking fees (typically at least £1,000). So make sure you work out it’s worth going after a low headline rate.

And of course, the usual remortgaging caveats apply, think about your personal circumstances, not just the market trends.

When will the base rate rise strike?

Rumours of an imminent rate rise have been circulating ever since Mark Carney became governor of the Bank of England in 2013.

However, this time, many are expecting that the rumours might actually come true and we’ll see the first rate rise in a decade.

The next BoE vote on the base rate will happen on 2 November 2017, when the nine strong Monetary Policy Committee will decide if now is the time to take up the rate, and how much to raise it by.

What could a rate rise actually look like?

Before the outcome of the 2016 Brexit referendum, it was widely anticipated that the BoE would take the rate up. But to calm markets following the result, the BoE changed tack and halved the rate to 0.25%.

However, now a rate rise is back on the cards, we might see the return of the plan to gradually bring the rate up to around half of the “historical average”. This could mean slowly bringing it up to 2.25%.

However, any immediate rate rise will likely just be a return to 0.5%, whether this would begin the gradual rise to 2.25%, or that’s where the rate would sit for a number of years, remains to be seen.

Is it time to fix your mortgage rate?

A fixed rate mortgage can keep your costs at a set level for as long as ten years.

Compare mortgages