Ahead of an expected interest rate cut next week, lenders are still upping some fixed deals while others are coming down
Major lenders are continuing to increase some of their fixed mortgage rates, at the same time cutting others.
As of tomorrow (31 January) Santander will increase some of its fixed rates by 0.02 percentage points, but is also cutting its five-year fixed deals by up to 0.28 percentage points.
NatWest is upping its fixed mortgage rates by up to 0.11 percentage points while TSB and Co-Op have reduced several of their rates today (30 October).
The fluctuations have been ongoing for several weeks after rates began to rise at the end of last year.
This was a result of increasing swap rates – a reflection of market expectations for the future interest rates set by the Bank of England – which impact mortgage rates.
However, as they have begun to settle, and ahead of a predicted interest rate cut next week, experts think more mortgage cuts will come.
David Hollingworth of brokers L&C Mortgages said: “The mixed bag of some up, some down really stems from the recent upheaval in the gilt markets. That resulted in swap rates edging up. Although not an enormous spike, it was enough that many lenders were forced to react and increase mortgage rates.
“Others preferred to tough it out and so some, such as Nationwide, have only recently made any changes, increasing rates yesterday.
“At the same time the better-than-expected inflation data has helped to ease swap rates back down. That’s helping some lenders that had hiked rates to review their pricing again and chip away at their rates.”
Nick Mendes of brokers John Charcol added: “I expect we will see a mixture of reductions and increases but generally speaking reductions should be on the cards now.
“The only reason we may see increases is down to service levels, as we saw with NatWest end of last week as they held on for a sustained period when everyone else around them were increasing.”
The average two-year fixed rate is 5.52 per cent while the average five-year is 5.32 per cent, according to Moneyfacts.
But some of the best deals are much cheaper including a two-year fix with First Direct at 4.23 per cent, a three-year fix at 4.07 per cent and a 4.13 per cent five-year fix.
The Bank of England is widely predicted to cut the base rate by 0.25 percentage points to 4.5 per cent next week.
In response, experts hope that mortgage rates will continue to come down, however there is still some concern they will only do so slowly.
Aaron Strutt of brokers Trinity Financial said: “There is a mixed picture of rate hikes and price cuts at the moment.
“Many economists at the big banks are predicting at least three or four base rate reductions this year.
“This should mean fixed rates get cheaper, although there are no guarantees. The lender’s cost of funding mortgages has been coming down, so there has been frustration that fixed rates have increased.”
Not only does a volatile market cause concern for homeowners, it will also be a challenge for the Chancellor Rachel Reeves and the Government who promised to ease bill pressures for households across the country.
One of Prime Minister Sir Keir Starmer’s key targets for the Government was to improve living standards – something that would be measured by real household disposable income.
For anyone nearing the end of a fixed-rate term or considering a new mortgage deal, brokers say it is vital to act quickly.
Consulting a mortgage broker is highly recommended, as they can provide tailored advice and access a wider range of products than those available directly to consumers. Brokers can also help borrowers decide whether to secure a rate now and move onto a new rate should the market improve.
Securing a fixed rate now, even if rates feel high compared to previous years, could offer valuable protection against potential further increases in the coming months.
