Despite today’s Bank of England base rate increase, mortgage interest rates look set to keep falling and should be below 4% in a few weeks, according to industry experts.
Updated on 2nd February 2023
A few weeks ago, we reported that mortgage interest rates were falling, despite the latest base rate increase from 3.5% to 4%.
You may wonder why mortgage interest rates are coming down if the base rate is going up. It’s an understandable question.
Fortunately, competition among lenders is fairly strong. Simply put, banks want your business.
Confidence in the financial markets has been restored after the mini-budget was published last September.
When the mini-budget was unveiled by the former Chancellor, Kwasi Kwarteng, lenders temporarily withdrew mortgage products for new customers and reintroduced deals at higher rates.
Rates peaked in November
Interest rates peaked in November 2022 but have been falling since then. In mid-November, the average two-year fixed rate deal was at a high of 6.65%.
Why did lenders react to the mini budget in such a negative way? Quite simply, they had to price their fixed-rate deals in line with market expectations to ensure they weren’t going to make a loss on their loans. However, the pressure on the market has since eased, and the cost of borrowing has been falling.
A boost to buyer confidence
A number of five-year fixed-rate deals are expected to dip below 4% in the coming weeks, and one lender has already introduced a ten-year fixed-rate deal at 3.99%. Naturally, falling rates are boosting buyer confidence, and more people are expected to make offers on properties when rates dip below 4%.
With house prices dipping and interest rates gradually coming down, the number of first-time buyers entering the property market is likely to increase.
Healthy levels of new enquiries
‘New enquiry levels at MB Associates exceeded expectations in January,’ says our Sales Manager, Phil Leivesley. ‘It’s pleasing to see first-time buyers returning to the market. In addition, our lender partners appear up for the challenge to support the market this year. We’re seeing lenders consistently reducing pricing in order to secure business, and Virgin Money is out of the blocks with the first sub-4% fixed rate. I’m sure more will follow.’
First-time buyer advice
If you’re a first-time buyer hoping to get onto the property ladder this year, do your best to be prepared so that you can act swiftly when you find the right property.
Make sure you have all of your paperwork ready, i.e. proof of your income, which needs to be three months’ worth of payslips and bank statements showing your income and expenditure. Speak to an experienced mortgage broker. Ask them to provide a Mortgage Agreement In Principle (AIP), which is an indication of what you could borrow and will show a potential vendor that you’re serious about buying.
Do your research on property prices in the area where you intend to buy so that you’ll know whether a potential property is priced appropriately. The more you get to know your desired area, the more likely you are to know when a property that comes onto the market is value for money or overpriced.
We’re here to help with mortgage advice.