Rates and Mortgages

Mortgage rates will probably go up again if the base rate increases putting even more pressure on households and new borrowers. The cheapest five years deals are priced just under 4% at the moment - just below the base rate.

A rate rise on Thursday will only affect tracker mortgages that are linked to the Bank of England base rate. Fixed rates are determined by swap rates and as they are continuing to fail, fixed-rate products will likely follow suit.

The recent global banking wobbles have actually reduced the swap rates, which have been passed on through fixed-rate mortgage reductions launched over the last week or so. But any base rate increase will affect those on tracker rates, and may eventually be passed on through Standard Variable deals too. That would affect a very small % of all mortgage holders, but recently many would have taken such deals to reduce costs and to keep options flexible, as and when rates do eventually fall. It is so important though to seek professional advice based on individual situations, and not what the last news article tells you.

We won't see much change in the bank's fixed rates, they have been anticipating yet another BOE base rate increase and these have already been factored into recent rate increases by the majority of lenders. Let's hope they factor in the reductions as quickly as the base rate drops to 2.9% as predicted in the last budget. Unfortunately, I think Jeremy Hunt may have been sitting with Septic Peg when that guess was made.

Base rate increases rarely benefit borrowers. Those with tracker mortgages will feel the effects immediately, while those looking to refinance may find the available options less appealing. Without a doubt, 2023 is not the year of the borrower so far.