LF long-term (6-12 month) mortgage rate predictions for iWeekend

Within a 25 bp range of where we are today, unless there is a black swan event of course. Inflation seems reasonably stable so the Monetary Policy Committee can enjoy its summer holiday, and look to extend it into the New year

If the war in the Middle East ends and the BofE does not put up the base rate, then hopefully fixes will be roughly where they are now or a bit cheaper. Nationwide has just launched a 4.29% two-year fix which is pretty reasonably priced. If rates can get closer to 4% again then borrowers will think they are getting good value for money again. At the moment there are two-year tracker rates starting from 3.97% so they undercut the best fixes by quite a margin, but there is always the risk borrowing costs may rise and fixes will get more expensive. If there is a change to our Prime Minister, then the market could also worry because of the uncertainty that this could bring again. Many mortgage borrowers expect the medium-term outlook will lead to lower mortgage rates because the Bank of England does seem to want the base rate to come down. They are still locking into three and five-year fixes because they don't want to wait and see what happens in the market.Nationwide has a 4.34% 5yr fix.

Over the next 6 to 12 months, I expect mortgage rates to ease slightly, but I do not expect a dramatic collapse. My base case is that fixed rates gradually move lower if inflation keeps behaving and the Bank of England can signal future cuts with confidence. But this is not a clean road. If inflation stays sticky, services inflation remains high, or geopolitical shocks push energy prices back up, mortgage pricing could stay stubborn or even edge higher again. Lenders price off swap rates and market expectations, not just the Bank of England base rate, so borrowers should not assume one future rate cut automatically transforms mortgage deals overnight. The realistic prediction is boring but important: modest improvement, not a rescue mission. People coming up to remortgage should review early, secure an option, and keep watching the market. Waiting for the “perfect” rate can backfire. The better strategy is to protect yourself first, then improve the deal if pricing moves in your favour

Mortgage rates should drift lower over the longer term if the global economy keeps slowing. Weaker growth usually takes heat out of inflation, giving central banks more room to cut and lenders scope to price mortgages more keenly. But this will not be a neat march back to the ultra-cheap deals of the Covid years. The base case is gradual relief, not a sudden collapse. A sharper downturn or recession could pull rates down faster, while another energy shock, wage spiral or geopolitical flare-up could keep them stubbornly high. Borrowers should welcome improving deals, but not bet the house on a dramatic plunge.