Introduction to Mortgage Rates
Typical two and five-year fixed rate deals have fallen to less than 5% for the first time in over two years. However, borrowers are being warned that these rates may not decrease further anytime soon. The average rate for a two-year fix is now 4.97%, while the average rate for a five-year deal is 4.99%.
Current Market Trends
Rates have been slowly decreasing over recent months, which is positive news for borrowers coming off high two-year fixes and first-time buyers. Despite this, rates are still higher than they were five years ago, meaning those coming off longer-term fixed deals may face more expensive bills. Economists expect the Bank of England to cut the base rate again in November, but brokers anticipate that mortgage rate cuts may slow or stall due to higher-than-expected inflation.
Expert Opinions
David Hollingworth, associate director at L&C Mortgages, stated that reductions in rates have been small and may slow further or even reverse if the market reacts badly to the threat of higher inflation. He advised borrowers to consider fixing their rates now to avoid losing out if rates increase. Hollingworth also emphasized the importance of deciding how long to fix for, as the difference between two and five-year rates is minimal.
Impact of Inflation
Peter Stimson, director of mortgages at lender MPowered, warned that the jump in inflation would limit the chance of meaningful reductions in mortgage rates. Ranald Mitchell, director at brokerage Charwin Mortgages, agreed that lenders have been keeping the market competitive, but stubborn inflation means they can only go so far. As a result, remortgage deals may not get much cheaper anytime soon.
Buy-to-Let Market
In the buy-to-let market, several lenders have cut fixed rate deals, with larger reductions coming from challengers and mutuals. Coventry Building Society reduced fixed rate mortgages by up to 0.38%, and the Mortgage Lender by up to 0.5%. The average two-year buy-to-let deal has fallen to less than 5%, but the five-year rate remains above 5% at 5.21%.
Advice for Landlords
Adam French, head of news at Moneyfacts, advised landlords that while mortgage costs are falling, the latest inflation reading has shut the door on the chances of another base rate cut this year. As a result, landlords may only see modest mortgage rate reductions in the short term.
Conclusion
In conclusion, while typical two and five-year fixed rate deals have fallen to less than 5%, borrowers should not expect rates to decrease further anytime soon. With inflation rising, lenders may be less likely to cut rates, and borrowers should consider fixing their rates now to avoid losing out. It is essential for borrowers to weigh their options carefully and consider factors such as the length of the fixed rate and the potential for future rate changes. By doing so, borrowers can make informed decisions and secure the best possible deal for their mortgage.
