Alexander Fraser Mortgage Advisers, Brightfield Business Hub, Bakewell Road, Peterborough (2026)

We have helped hundreds of customers over the years and specialise in tricky and difficult residential & buy to let mortgages.

19/09/2024

UK interest rates expected to be held at 5%

Interest rates are expected to be held at 5% by the Bank of England on Thursday.

The decision at midday comes after it was revealed inflation, which measures the rate UK consumer prices are rising at, remained at 2.2% last month.

The figure is just above the Bank's 2% target, but its governor Andrew Bailey has warned people not to expect a sharp fall in rates in the coming months.

Economists and investors are betting on rates to be left unchanged on Thursday and for the Bank to opt to cut them again in November instead.

Rob Wood, chief UK economist at economic research consultancy Pantheon Macroeconomics, said the inflation data released on Wednesday gave the Bank of England "little reason to rush to cut interest rates again" on Thursday.

"It still seems likely that they will decide to keep interest rates paused this month, and instead wait to cut rates again in November and December," added Susannah Streeter, head of money and markets, at investment firm Hargreaves Lansdown.

Interest rates dictate the cost of borrowing set by lenders for loans such as mortgages and credit cards - as well as the returns on savings.

While rates were cut for the first time since March 2020 last month, the cost of borrowing remains high, with homeowners on fixed rate mortgages still facing the prospect of much higher repayments when deals expire over the next few years.

Mr Bailey has previously warned the Bank must "make sure inflation stays low and be careful not to cut interest rates too quickly or by too much".

The decision to cut rates in August was tight. Five of the Bank’s nine-member Monetary Policy Committee (MPC), voted for a quarter point cut.

Allan Monks, UK economist at investment bank JP Morgan, said it expected the Bank to hold rates.

"The MPC is minded to ease cautiously and we look for the next cut in November," he added.

"The Bank has been turning more dovish lately, but requires more favourable data surprises to easing more quickly."

Rates have climbed in recent years as the Bank has tried to slow the pace of consumer price rises.

Prices started rising quickly as demand for goods increased when Covid lockdown restrictions were lifted. But energy and food prices then soared following Russia's invasion of Ukraine. This led to inflation peaking at 11.1% in October 2022 - the highest rate in 40 years.

The theory behind increasing interest rates to tackle inflation is that by making borrowing more expensive, more people will cut back on spending and that leads to demand for goods falling and price rises easing.

But it is a balancing act as high interest rates can harm the economy as businesses hold off on investing in production and jobs.

14/08/2024

Could mortgage rates fall further this year?

Mortgage rates have continued to drop following a cut to the Bank of England base rate. Will they fall further this year?
Mortgage rates have continued to fall following the Bank of England's decision to reduce the base rate last week.
The base rate was lowered from 5.25% to 5%, the first cut since 2020.

Mortgage rates had already started falling last month in anticipation of the cut, and some lenders have made further reductions following the Bank's interest rate announcement on 1 August.

There are now several sub-4% five-year mortgage deals on the market after a flurry of rate cuts.
There are three more Bank of England meetings to come this year where interest rates could change again. Markets are expecting another one or two cuts this year, indicating that mortgage rates could fall further.

About 1.5 million households who need to remortgage this year will see their payments rise by £1,800 a year on average, according to the Resolution Foundation.

Meanwhile, an increasing number of young people are taking out .They are doing this in a bid to get on the housing ladder, as well as lower their monthly repayment costs.

Here's everything you need to know about UK mortgage rates right now.

Are lenders cutting mortgage rates?

According to Moneyfacts, the average two-year fixed-rate mortgage is priced at 5.67%. The average five-year deal comes in at 5.31%.

This represents a decent drop compared to mid-July: the average two-year fix was 5.9% while a five-year deal was 5.49% on 16 July.
However, rates were lower earlier this year: on 1 February, the average two-year fix was 5.56% while the average five-year deal was 5.18%. This followed some aggressive price cutting by lenders in the New Year.

In terms of price cutting at the moment, major lenders started reducing rates at the end of June, led by Barclays Halifax, Nationwide, and NatWest.

And that has continued as Santander, Virgin Money, Leeds Building Society, The Mortgage Works and Skipton Building Society have all made mortgage rate cuts in recent days.

18/04/2024

On 21 March 2024, the Bank of England held the base rate at 5.25% for the fifth time in a row.

Financial markets are currently predicting the first cut in interest rates will be in June 2024, falling to around 3% by the end of 2025, according to the latest forecasts from Capital Economics.

17/08/2022

What does the Bank of England interest rate rise mean for you?
From first-time home buyers to credit card users, we look at how your finances may be affected

The number of customers in arrears with their mortgages continued to fall in the first three months of 2022.

The Bank of England has voted to raise interest rates by 0.5 percentage points to 1.75% as the UK battles to prevent inflation running out of control. We look at what that means for your finances.

So what does it mean for mortgages?

It depends what type of deal you are on. Most borrowers are on fixed-rate mortgages, and so for the time being at least they are insulated from the impact of the latest interest rate rise.

However, the banking body UK Finance says about 21% of households are on a variable rate – either a tracker mortgage, where the rate you pay is explicitly linked to the Bank base rate, or their lender’s standard variable rate (SVR).

About 800,000 borrowers have a tracker mortgage, while approximately 1.1 million are on an SVR.

A tracker mortgage will directly follow the base rate – the small print of your mortgage will tell you how quickly the rise will be passed on, but next month your payments are likely to go up, and the extra cost will fully reflect the base rate rise.

On a tracker at 2.5%, the interest rate would rise to 3%, adding £38 a month to a £150,000 repayment mortgage with 20 years remaining.

With SVRs, things are less straightforward: these can change at the lender’s discretion, but many people will probably see an increase in their monthly costs. However, banks and building societies are likely to come under pressure to either pass on none of the latest increase, or only a proportion of it, to their SVR borrowers. Some lenders may not immediately declare their intentions, or may say that any increase won’t take effect for perhaps a few weeks or more.

So people on fixed-rate mortgages don’t have to worry?
Some with fixed-rate deals that are due to end later this year or early next are likely to be very worried – mainly because the price of new fixed-rate mortgages has shot up during the last few months.

Overall in the UK there are just under 9m residential mortgages outstanding, of which 75% are on a fixed rate, according to UK Finance.

In total, about 1.3m fixed-rate mortgage deals are scheduled to end during 2022, though of course that includes a number that have expired since January, and where in many cases a new deal will have already been taken out.

During the past few years the vast majority of people taking out a mortgage have been opting to fix their payments, mainly because fixed rates have been so competitive, but more recently in order to seek protection from rising interest rates.

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Brightfield Business Hub, Bakewell Road
Peterborough
PE26XU

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http://www.alexander-fraser.co.uk/

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