5% mortgage rates (again)

[Twiglets1]

Following on from the previous two of these threads both with 6% mortgage rates in the title, I think it's more realistic to return to 5% for this one.

According to this Rightmove article, the current average mortgage rate for a five-year fixed rate mortgage is 4.84%, up from 4.85% last week. The current average rate for a two-year fixed rate mortgage is 5.23%, which is unchanged from last week. The lowest available five-year fixed rate is 4.13%, and the lowest available two-year fixed rate is 4.46% – both unchanged from last week.

On 27th March, the average 5 year fixed rate mortgage for someone with a 60% LTV was 4.35%.
For someone with a 75% LTV it was 4.72% whereas 80% was 4.79%.

For someone with a 90% LTV it was 4.98% whereas 95% was 5.47%.

Two year fixed rate mortgages are slightly higher.

https://www.rightmove.co.uk/news/articles/property-news/current-uk-mortgage-rates/

Swop rates are definitely indicating that lenders should have some extra room to manoeuvre now. I'm not seeing enough yet to expect large changes in the cost of borrowing to the consumer though. There is an issue that many lenders had already priced this in so they won't make meaningful changes just "feel good" gestures. We need another couple of base rates drops to really make a significant difference. That is possible but not in anyway a certainty.

The Telegraph: Homeowners only given four months to ‘ditch and switch’ mortgage deals

Santander and Nationwide recently shortened the window which allows borrowers to lock in a mortgage deal before their current term expires. The two banking giants previously offered mortgage holders a six-month period of opportunity to secure a rate and switch to a cheaper deal if one came up.
But the lock-in periods have been reduced by a third and now stand at four months.

Mortgage brokers expect other home loan providers to follow in the footsteps of Santander and Nationwide as interest rates continue to trickle downwards. Ben Perks, managing director at Orchard Financial Advisers, said: “It is highly likely that many lenders will follow suit and reduce back down to four months.
“It was a useful tool to have six months during volatile times, but as rates reduce and stability starts to return the need for securing rates early reduces.”

Six of the other main mortgage lenders – Lloyds, Halifax, Barclays, NatWest, HSBC and Virgin Money – still have their policy set at a half-year window.

Borrowers who fail to remortgage or product transfer on to a new deal are automatically put on to their lender’s default standard variable rate (SVR) when their term comes to an end. The average SVR currently stands at 8.16%, according to analysts Moneyfacts. This is far higher than the average two-year fix, 5.75%, and the average five-year fix of 5.36%.

https://www.telegraph.co.uk/money/property/mortgages/homeowners-four-months-ditch-switch-mortgage-deals/#:~:text=Homeowners%20only%20given%20four%20months%20to%20'ditch%20and%20switch'%20mortgage%20deals,-Major%20banks%20slash&text=Major%20lenders%20have%20cut%20the,for%20more%20to%20follow%20suit.

Why rising inflation doesn’t spell disaster for your mortgage (Telegraph)

Inflation rising above the Bank of England’s 2% target to 2.2% hardly seems like news worth celebrating – but the fact that traders had predicted a rise of 2.3% means things could certainly be worse. This was alongside the belief that price pressures would ease by just 0.1% on a monthly basis, which again came in better than expected at 0.2%. Another positive came from services inflation growing slower than many had thought.

Traders have welcomed these positive developments and are now fully pricing in two more interest rate cuts by the end of the year. This would bring the Bank of England's base rate to 4.5% from 5%, following on from the first cut from 5.25% in August.

Ruth Gregory from Capital Economics said that while rate-setters may hold off from cutting again immediately in September, the numbers “will reassure the Bank of England that the disinflation process is on track and opens the door to more interest rate cuts later this year”.

www.telegraph.co.uk/business/2024/08/14/why-rising-inflation-doesnt-spell-disaster-your-mortgage/

Useful article in This is Money of the best mortgage rates for FTBs:

40% deposit or more
Five-year fixed rate mortgages
Barclays has a five-year fixed rate at 3.84 per cent with a £999 product fee at 60 per cent loan to value.
Two-year fixed rate mortgages
Coventry Building Society has a 4.54 per cent fixed rate deal with a £0 product fee at 60 per cent loan-to-value. This deal also comes with £500 cashback.

25% deposit
Five-year fixed rate mortgages
Virgin Money has a five-year fixed rate at 3.99 per cent with a £995 product fee at 75 per cent loan to value. The deal also comes with a £214 valuation fee, but this is more than offset by the £300 cashback.
Two-year fixed rate mortgages
Coventry Building Society has a 4.77 per cent fixed rate deal with a £0 product fee at 75 per cent loan-to-value. It also comes with £500 cashback.

15% deposit
Five-year fixed rate mortgages
Coventry Building Society has a five-year fixed rate at 4.51 per cent with a £0 product fee at 85 per cent loan to value. This deal also comes with £500 cashback.
Two-year fixed rate mortgages
Coventry Building Society has a two-year fixed rate at 4.98 per cent with a £0 product fee at 85 per cent loan to value. The deal comes with £500 cashback.

10% deposit
Five-year fixed rate mortgages
NatWest has a five-year fixed rate at 4.68 per cent with a £995 product fee at 90 per cent loan to value. This deal also comes with £250 cashback.
Two-year fixed rate mortgages
Tipton Building Society has a two-year fixed rate at 5.14 per cent with a £0 product fee at 90 per cent loan to value. The deal comes with a £275 valuation fee. No cashback.

5% deposit
Five-year fixed rate mortgages
NatWest has a five-year fixed rate at 5.21 per cent with a £995 product fee at 95 per cent loan to value.
Two-year fixed rate mortgages
Nationwide Building Society has a two-year fixed rate at 5.79 per cent with a £0 product fee at 95 per cent loan to value. The deal comes with £500 cashback.

https://www.thisismoney.co.uk/money/mortgageshome/article-13747089/Best-mortgage-rates-time-buyers-long-fix-for.html

Andrew Bailey raises hopes of more rapid interest rate cuts

Andrew Bailey raised hopes this afternoon of more rapid interest rate cuts for millions of mortgage holders as he said inflation appears to be fading more quickly than feared. The Governor of the Bank of England said the “persistent” factors keeping price rises high “appear to be smaller than we expected”, raising the possibility that he may be able to follow last month’s rate cut with more reductions in borrowing costs.

“We are seeing a lower level of inflation persistence than we expected a year ago. But, we need to be cautious because the job is not completed – we are not yet back to target on a sustained basis,” he said at the Jackson Hole conference, a month after cutting rates for the first time in four years, from 5.25pc to 5pc.

It came as Jerome Powell gave the strongest indication yet that the Federal Reserve will cut US interest rates next month, announcing “the time has come for policy to adjust”.

.https://www.telegraph.co.uk/business/2024/08/23/households-face-higher-winter-energy-bills-as-price-cap/#:~:text=interest%20rate%20cuts-,Andrew%20Bailey%20raised%20hopes%20this%20afternoon%20of%20more%20rapid%20interest,fading%20more%20quickly%20than%20feared.

@Twiglets1 Just want to say thank you for this thread and all of your updates! It's really helpful and informative 👍

Nationwide cut off for switches starting next month is this Sunday so I’m done now. Dates are here, and you can’t cancel after the 20th https://www.nationwide-intermediary.co.uk/products/rate-switch

Thanks for giving me the most up to date news.

I can’t deal with the volatility and how much less stability there is for those with higher LTV who are probably young parents with huge childcare fees. Seems smoother sailing once you’re under 60%. Though of course the “V” part can seem pretty volatile too!

Thanks @Iop

@MortgageMama I feel your pain - it's such a tough phase of your life when the mortgage is high and so are the childcare fees.

But it does pass I promise.

Welcome news reported in This Is Money yesterday re mortgage rates being reduced for buyers with smaller deposits.

Nationwide Building Society, NatWest and TSB have all announced they are repricing home loans. Those likely to benefit the most from the latest wave of cuts are first time buyers and home movers who are buying with smaller deposits. The latest announcements follows fresh in the wake of Barclays and TSB who cut mortgage rates earlier this week including on 5% deposit deals.

Nationwide is reducing rates by up to 0.25 percentage points across two-year, three year and five year fixed products for those buying with deposits of between 25 and 5% of the purchase price. From tomorrow, Britain's biggest mutual will be offering the lowest rate on the market for first-time buyers and home movers purchasing with a 5% deposit. Its five-year fixed deal will charge 5.04% with a £999 fee. On a £200,000 mortgage being repaid over 25 years, that equates to £1,174 a month.

In another welcome change for first-time buyers and those with smaller deposits, NatWest has also announced fixed rate cuts of up to 0.19% across selected 90% and 95% loan-to-value products.

TSB is also reducing rates, albeit not in the high loan-to-value brackets with rates changing on deals that require a 15% deposit or more. From tomorrow, TSB is reducing rates by up to 0.35 percentage points with first-time buyers, home movers and remortgaging customers set to benefit. TSB says its rates will start from 3.79% from tomorrow - close to the lowest rate on the market currently offered by NatWest at 3.77%.

https://www.thisismoney.co.uk/money/mortgageshome/article-13843191/Nationwide-NatWest-TSB-slash-mortgage-rates-buyers-smaller-deposits.html

I'm in the same with high mortgage and high childcare costs, hopefully with second baby arriving next year. It's so difficult to see when it will get easier...always choosing between money and family, time is sparse

Hi, been lurking for a while now and was wondering if anyone could offer advice.

Our new remortgage deal is due to start on the 1st of October, we have secured a 2 year deal at 4.54 with no fee. I have until the 20th of September to cancel if I wanted. With all the talk in the media about rates dropping, I am concerned they will drop right after our cancellation period. What are people's thoughts? Is it worth going on the standard variable, which is quite a bit higher, and seeing if they do drop or would people advise to stick with the deal I have already secured. I know no one has a crystal, but was wondering what others are doing. I am also aware that this rate is better than the original ones on offer at the start of our remortgage process. I am just really struggling to make the final decision.

Thanks

@Grey13 I think for a 2 year fixed deal with no set up fee, 4.54% is a fair rate.

I do think they will fall further but not massively so & also you can only work with what is currently available. I wouldn’t want to switch to a SVR personally as they are so much higher than fixed rates, though I appreciate what you’re saying that the gamble could pay off.

I would choose a 2 year fix over a 5 year fix myself at the moment & yes, would probably accept the deal you have been offered and then fix again at a hopefully lower rate in 2 years time.

The Bank of England will next meet on 19th September 2024 to decide if they’re going to drop rates again. The FED (America) decide the day before on the 18th. We’re likely to drop if the FED drops. I would be inclined to wait to hear what happens.
It might be worth listening to this Merryn Talks Money Podcast. https://links.message.bloomberg.com/u/click?_t=f574328d4d0c4c359b90d8e49b10e21d&_m=0f2601aeb8dd4bc28508929210bd3a6c&_e=PXaKmJNaMHxsp35fr_OnCP_UmflLBI57kewPdmK5av_zt21FNI7DXIzyhST-awp3RSLjbTSoDYw-yFvhnoREzwwZUFMb2tXrLVKGHYuPvzUP4PxLpz48vGFiZ2RncjctermE6Uzl2beVW0FOtDv5qUA0MrQ5VXActw7puutqoYdjzQrGWZTDcoVONW7hPOolIF552ibgDwdTjbv_WCbnYGxW39_jrx-ERwuWGGNjMqNrBk9wBqInDuBRDwAX1cMRI-uL7Lct6Uia8RFyHLgWNZGFY8ethUoNuuL8oq3OHKiWACWtp87UeZjdjT0jGM65qYIilzEdng-QkKUND1cnAA%3D%3D

What I’ve read is that UK rates are more likely to fall again in November than September, but you never know.

@Twiglets1 Thank you, I appreciate the reply and advice. SVR is a lot higher, I think around just under 7 so it would mean paying quite a bit more in the hope of further reductions. So in the long run I guess that alone could wipe out any potential savings. At least we are seeing much lower rates than we were and fingers crossed in 2 years it will get better. Oh to have a crystal ball.

@Twiglets1 really helpful advice, thank you! In a similar position to PP watching what’s happening before we need to fix. We have until 20 October so await the 18/19 Sept with interest.

BBC: Inflation rate holds steady in August at 2.2%

Prices for air fares rose but the increase was offset by lower fuel prices and prices rising at a slower rate in restaurants, the Office for National Statistics (ONS) said.

The latest figure means inflation remains slightly above the Bank of England’s target of 2%.But it is significantly lower than at the peak of the cost of living crisis in 2022.

The latest inflation data comes as the Bank of England is expected to keep interest rates unchanged at 5% when it meets on Thursday.

https://www.bbc.co.uk/news/articles/c4g927qykywo

Joining the thread as we have 12 months to go now until remortgage. Really useful read already as I hadn’t realised the lock in period had dropped to 4 months for some lenders.

Trying not to beat myself up for not taking a 10yr fix at <2% in 2020

we have some savings we could use to reduce mortgage if needed, I think if we can’t get under 4% then that will be the plan. Based on that, and a guesstimate at valuation we’d be anywhere between 18-30% LTV. The LTV doesn’t seem to be having the impact on rates I’m sure it used to though…

thank you for all the info & regular updates!

Hindsight is a wonderful thing @Isyesterdaytomorrowtoday & I’m sure lots of people would have done the same but not many of us predicted interest rates rising as rapidly as they did!

Anyway, the good news for you is that you have another 12 months before you need to remortgage and in that time, mortgage rates are likely to reduce so I would really hope you will be able to get a rate under 4%.

@Grey13
The Federal Reserve just announced that it’s cutting rates by a half-point, bringing rates down to 4.75% to 5%.
The Bank of England may well cut by 0.25% tomorrow 🙏.
amp.theguardian.com/business/live/2024/sep/18/us-interest-rate-decision-federal-reserve-uk-infation-cost-of-living-bank-of-england-business-live

Also reported in the BBC: US goes big with first interest rate cut in four years.

However, UK rates still seem to be mainly expected to stay the same until November's meeting.

www.bbc.co.uk/news/articles/cz04md0zdrno

Will see what the bank of England says tomorrow. I think we are going to stick with the deal of 4.54 for 2 years. Unless Nationwide makes any further reductions over the next 2 days.

Bank of England holds interest rates but signals more cuts to come

The Bank of England has kept interest rates on hold even as Andrew Bailey signalled borrowing costs would continue to fall this year. Policymakers voted 8-1 to keep rates unchanged at 5% as the Governor welcomed a further easing in price pressures since policymakers reduced rates in August. However, officials said they remained cautious about cutting rates too quickly amid a “tight” jobs market.

Mr Bailey said: “Inflationary pressures have continued to ease since we cut interest rates in August. The economy has been evolving broadly as we expected. If that continues, we should be able to reduce rates gradually over time.”

https://www.telegraph.co.uk/business/2024/09/19/ftse-100-markets-latest-news-interest-rates-bank-of-england/

Guardian: Sterling drops after Bank of England boss hints at ‘aggressive’ rate cuts

The pound has fallen sharply after the governor of the Bank of England told the Guardian it could become a “bit more aggressive” in cutting interest rates if inflation continues to cool.

Andrew Bailey said he was encouraged that cost of living pressures had not been as persistent as feared, but warned the Bank was monitoring the Middle East crisis amid fears of an oil price shock. In a wide-ranging interview Bailey held out the prospect of Threadneedle Street becoming a “bit more aggressive” in cutting interest rates, provided the news on inflation continued to be good.

City investors expect the Bank to restart cutting interest rates at its next policy meeting in November, with financial markets moving after Bailey’s comments to fully price in a quarter-point cut to 4.75%.

https://www.theguardian.com/business/2024/oct/03/sterling-pound-bank-of-england-andrew-bailey-aggressive-interest-rate-cuts-inflation#:~:text=Andrew%20Bailey-,Sterling%20drops%20after%20Bank%20of,hints%20at%20'aggressive'%20rate%20cuts&text=The%20pound%20has%20fallen%20sharply,if%20inflation%20continues%20to%20cool.

This is Money: five major banks are slashing home loan costs

Five more mortgage lenders have today announced cuts to home loan prices.
Barclays, HSBC, Halifax, Santander and NatWest are all making a number of interest rate reductions across various mortgage deals.

Since the start of July, the lowest five-year fixed rate mortgage has fallen from 4.28% to 3.69%. Meanwhile, the lowest two-year fix has fallen from 4.68% to 3.89%.

Barclays set the wheels in motion this morning when it announced a whole raft of cuts primarily benefiting first -time buyers and home movers, including a number of sub 4% deals for those with the biggest deposits. For buyers with a 15% deposit, Barclays will be offering a rate of 4.46%, which unless beaten by tomorrow, will be a new best buy.

HSBC confirmed its two-year and five-year fixed mortgages for both home movers and first time-buyers are reducing by up to 0.25 percentage points. Halifax then followed suit, by cutting mortgage rate on selected products by up to 0.11 percentage points for home movers and first time buyers.

Santander and NatWest also announced a wide range of range cuts for tomorrow. From tomorrow, home buyers and people re mortgaging will see Santander's fixed rate deals drop by 0.29 percentage points.

Mortgage rate cuts: These five major banks are slashing home loan costs (msn.com)