What’s Happening With UK Mortgage Rates? – Forbes Advisor UK

The ever-tightening cost of living crisis and soaring inflation (which stood at 7% in the 12 months to March) is fuelling the likelihood of more interest rate rises this year – putting further pressure on the monthly budgets of millions of mortgaged UK homeowners.

What’s happening with interest rates?

The Bank of England raised interest rates to 0.75% in March, which could add on around £300 a year to a 2.25% variable rate mortgage deal of £200,000. The next interest rate decision will be this Thursday (5 May) when the Bank is widely expected to raise rates again, most likely to 1%.

Existing Bank rate-linked mortgages, such as base rate trackers, will mirror the March rise, while the cost of many new fixed rate deals will have already factored it in. It’s the fourth hike to Bank rate since December 2021, when it stood at just 0.1%.

Two- and five-year fixed rates

According to Trussle, our mortgage partner, an increasing number of homeowners are opting for longer-term fixed mortgages in a ‘bid for stability’. It said the initial term length of new fixed rate mortgages being taken by customers has gone up by 17%.

While historically, borrowers would pay more for the longer-term security that a five-year deal offers, Halifax is offering a five-year fixed rate mortgage which is cheaper than its two-year fixed rate equivalent. The ‘no-fee’ five-year fix is priced at 2.82% for borrowers with a 40% deposit, compared to a rate of 2.94% for the same deal over two years. .

Low deposit deals

As rising house prices and the soaring cost of living apply more pressure on affordabilty, the choice of 95% mortgage deals is growing. First Direct is the most recent entrant into the market (27 April), launching fee-free 2- and 5-year fixed rate deals priced at 2.79% and 2.94% respectively.

The loans will be available up to £550,000 with maximum borrowing terms of 40 years.

Find more on this and other mortgage news on our mortgage updates page.

And for more lenders offering 95% deals and all other loan-to-value mortgages, see our tables below.

Why are interest rates rising?

The Bank of England’s Monetary Policy Committee (MPC) uses interest hikes as a tool to cool the economy and tame soaring inflation. And the Consumer Prices Index (CPI) measure of inflation surged ahead by 7% in the 12 months to March 2022, marking its highest level for 30 years.

The Office for Budget Responsibility (OBR) had predicted that inflation will peak at 8.7% by this autumn, but this figure could now rise. It reflects both the uncertainty around the Russian invasion of Ukraine, as well as the UK’s energy price cap which climbs in April by 54%, resulting in higher energy bills for millions of households.

The cap will rise again in October, when analysts are forecasting at least a further £500 will be added onto the cost of a typical annual energy bill.

What are today’s mortgage rates?

With a frequently-mobile Bank rate and inflation rate, keeping track of mortgage costs is challenging – especially given they can change on a daily basis. One simple way is use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.

To find out what deals are available at today’s rates for the kind of mortgage you’re after, you’ll need to enter your personal criteria into the table below. Here’s what to do:

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

What else do I need to know?

Mortgage deals offering the cheapest rates usually come with fees attached. You can opt to pay these upfront or add them to the loan. To factor in the cost of the fee, order your the results by ‘initial period cost’ (in the ‘Sorted by’ dropdown).

Alternatively, you can order results by initial rate, lowest fee or monthly repayment – even by the lender’s ‘follow on’ rate that the deal will revert to at the end of the term.

While mortgage rates change daily, the very cheapest are reserved for bigger deposit amounts, usually of 60% of the property value or more. And in all cases you will need a sufficient income and clean credit history to be accepted for a mortgage.

If you want to see what your monthly mortgage payments might look like in different scenarios while overlaid with household bills, our mortgage calculator will do the sums.

While Trussle lists around 12,000 mortgage deals from 90 lenders – which accounts for the vast majority of the market – occasionally some deals are available exclusively through a handful of brokers, so you may not see these listed.

When can I start a remortgage?

Mortgage offers from the major lenders tend to last for six months (as set out in our Best Lenders For Remortgaging), although some lenders cap expiry dates at three months. It’s worth looking a new mortgage deal this far in advance as you will be able to lock in a rate you see today – at no cost and with no strings attached.


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