The average rate on a five-year mortgage deal has dropped below 6% for the first time in seven weeks. Moreover, according to financial data providers, it could fall even further.
Since the mini-budget two months ago hit the British economy leading to Kwasi Kwarteng losing his job as chancellor, the mortgage numbers did not budge down. The housing market has turned into a mess through Kwarteng’s plan for unfunded tax cuts. The radical mini-budget scheme caused a spike in the long-term borrowing costs that underpin mortgage deals. Since October, his successor Jeremy Hunt has been successfully trying to reverse the disastrous decisions. The financial markets are gradually calming down.
This reduction is good news for future borrowers. Borrowers must be relieved to see that fixed mortgage rates are starting to fall. In months to come there may still be more changes that are positive. Those who paused their homeownership plans may consider proceeding with purchasing deals.
This year interest rate has already been raised by the Bank of England causing home loan sagging in numbers. However, the financial shock induced by the mini-budget forced borrowers to withdraw more than 1,500 deals. The average two- and five-year fixed mortgage rates rose sharply, from 4.74% and 4.75% respectively, to peak at 6.65% and 6.51%. The number of deals hit the bottom with 2,258 trans. For comparison, on the eve of the Kwarteng budget there were 3,961 deals in the process.
Indeed, the rates could drop further, still experts cannot predict the pace or give approximate period for this possible decrease. You should note that just a handful of lenders are offering sub-5% fixed deals at the moment. Borrowers may be recommended to be patient for a little while longer yet before committing to a fixed mortgage, or better to wait until next year to see the market recovered from the recent interest rate instability.
