Picture of Mark Harris

Mark Harris

Chief Executive

What next for mortgages as Bank of England holds interest rates at 5.25 per cent?

The Bank of England’s decision to hold base rate at 5.25 per cent for the second consecutive meeting was widely expected by the markets. It looks as though efforts to bring inflation under control are working, although Bank of England governor Andrew Bailey did not rule out further rate increases if needed and warned that it was ‘much too early to be thinking about rate cuts’.

Hard-pressed borrowers worried about affordability will welcome the news as they have seen significant increases in mortgage costs in recent months. Before the pause in rate increases at the Monetary Policy Committee’s September meeting, there were 14 consecutive hikes, taking base rate from 0.1 per cent in December 2021 to 5.25 per cent today.

So what next for borrowers? Fixed-rate mortgages are influenced by future base-rate movements and therefore not directly linked to what is decided this week. Many lenders have reduced their fixed rates in the past few weeks on the back of calmer Swaps, which underpin the pricing of fixed-rate mortgages. While the days of rock-bottom mortgage rates are long gone, and we all have to get used to paying more for our mortgages, we expect pricing to improve further in coming weeks.

Property portal Rightmove reports that the average mortgage rate for a five-year fix is 5.48 per cent (at 85 per cent loan-to-value), down from 6.24 per cent a year ago. However, while rates are clearly moving in the right direction, this is an average rate and cheaper deals are available, depending on your loan-to-value and other factors.

Borrowers who are due to remortgage in the next few months will still face a payment shock, so it is important to plan ahead as much as possible, take advice and act now. Mortgage products can be booked up to six months before you need them so it is worth speaking to a whole-of-market broker, such as SPF Private Clients, to find out what’s available.

Market Commentary Blog 2 November 2023

latest Market Insights