Mortgage interest rates are largely dependent on the Bank of England base rate and the last few years have been pretty tough for borrowers.
As the base rate started to rise sharply following Liz Truss’s mini budget in September 2022, mortgage rates followed suit. High inflation then took over and that led to the base rate hitting a 15-year high of 5.25% in August last year.
In anticipation of this, the average interest rate charged for a 5-year fixed mortgage at 75% LTV peaked at over 5.8% last year. Borrowers coming off fixed rates were worst hit, as monthly payments more than doubled for some.
Thankfully, as inflation began to fall and the financial markets gained back confidence in the economy, mortgage lenders started to reduce rates, despite the fact that the base rate hadn’t yet changed.
What effect could the election result have on mortgage rates?
Before the election, economic forecasters were predicting that the Monetary Policy Committee would start to bring the base rate down this summer.
And the good news is that because Labour was expected to win by a large majority, there’s been no shock to the market.
In addition inflation is now back to its target of 2%. These circumstances have led to the Bank of England reducing the base rate to 5%.
Capital Economics is currently forecasting that the downward trend will then continue, and the base rate could be at 3% by the end of next year.
That means mortgage rates should keep falling, albeit very slowly, with experts suggesting the 5-year fixed average will not drop below 4% for the rest of 2024.
“Fixed-rate mortgages are actually quite keenly priced today - and whilst it is hoped that the base rate will fall further over the coming year, it is entirely possible that any new fixed-rate deals on offer, won’t necessarily keep pace.”
Competition between lenders can also have an effect on mortgages, so if consumer confidence increases over the coming months as expected, we may see lenders taking steps to make their products more attractive.
Even if the interest rate doesn’t change much for the rest of this year, borrowers could see things like fees reducing and mortgage cashback incentives.
What should landlords do next?
If you currently have a fixed deal that’s ending in the next 6-12 months, or you’re thinking of making a new purchase, we’d suggest you speak to a professional broker, like our partner Embrace Financial Services, sooner rather than later.
When the property market gets busy, the most popular mortgage deals tend to ‘sell out’ and are replaced. So it’s well worth having an experienced broker working on your behalf, who can make sure you don’t miss out on the best products.
Also, do bear in mind that around two-thirds of Buy to Let products are broker-only deals, meaning they’re not available to you as an individual borrower going direct to a lender.
If you would like to discuss your own borrowing requirements, our partners at Embrace Financial Services are ready to help. Request a callback via our website or book an appointment here.
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Most Buy to Let Mortgages are not regulated by the Financial Conduct Authority
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