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When will fixed mortgage rates drop?

Journalist: Callum Mason, i

ended 05. June 2023

Fixed mortgage rates are up on two weeks ago after inflation figures were higher than expected.

When can borrowers expect rates to start to reach their peak, and when can they expect them to drop to the levels seen before the inflation figure was announced?

5 responses from the Newspage community

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Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
It has been a pretty hectic few weeks with a lot of mortgage rate increases and product withdrawals. We thought the scale of changes had slowed down towards the end of last week and then Barclays, Santander and TSB made a selection of price hikes. So far today there has not been much rate movement.
Most of the lenders have raised rates now so hopefully these increases will be sufficient to cover the rise in the cost of funding. Fixed rates may well settle where they are and get slightly cheaper over the coming months unless there is more economic bad news.
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Graham Cox
Director at Bridging Hub
Given Core CPI inflation rose 0.6% last month, fixed mortgage rates may not peak for another 3-6 months. Then it could take another 6 months for them to fall to where they were before the inflation announcement, so potentially spring to summer next year. In the meantime, significant property price falls are likely.
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Ashley Thomas
Director at Magni Finance
At the moment, the market is very volatile with rates increasing and decreasing off the back of inflation figures. The next set of inflation data will be released on the 21st of June and the base rate meeting is the following day. If the inflation data is positive, we will see fixed rates come down again.
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Matthew Jackson
Director at Mint FS
Despite rising cost of living and mortgage rates and other external pressures on house prices we are yet to see a significant drop in prices. However it is still predicted that prices will drop circa 20% this year - so if you are buying to see a return in the short to medium term then i would be waiting for the bottom of this adjustment.

Of course you will need to bear in mind that with rising interest rates any potential future mortgage finance could also cost more per month.

The market feels primed to pop - with no easing of cost of living costs or mortgage pricing, surely it is house prices that will go bang?

If you are buying for a long term home, then any future drops will just be on paper - keep your home long enough you will always make money!
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James Vince
Managing Director at Castle View Finance
Interest rates, including fixed mortgage rates, are influenced by a variety of factors, including inflation, economic conditions, bank policies, and market forces - local and international financial market factors. With inflation still above government targets, the pressure on curbing spend is all around the cost of money leading to upward pressure on interest rates.

We hoped that the continuous increases in the BOE base rate would have seen a greater impact on inflation, however, the direct effect of the source of inflation vs action appears to be unaddressed. This is the heavy increase in food costs, energy and general expenses - those day-to-day items that truly affect our cost of living appear unaccountable in the action plan.

When the cost of living comes under control, we will have a positive effect on the cost of money (wider money markets) which will feed through to improved fixed-rate mortgages. It would appear and feels like the uncertainty will be into 2024 and beyond.