
Mortgage rates: what is happening
The Bank of England opted to cut interest rates in February from 4.75 per cent to 4.5 per cent.
Base rate has been dropped by 0.75 percentage points since August when it was first cut from 5.25 per cent.
Between the start of July and October, the lowest five-year fixed rate mortgage fell from 4.28 per cent to 3.68 per cent. Meanwhile, the lowest two-year fix fell from 4.68 per cent to 3.84 per cent.
But the lowest rates are now higher at 4.13 per cent and 4.23 per cent, respectively, as rates have crept higher again with all of the best sub-4 per cent deals disappearing.
Nonetheless, mortgage rates remain well below their recent peak.
In 2023, a combination of base rate hikes and worries over inflation figures saw average two-year fixed mortgage rates reach a high of 6.86 per cent in the summer, according to Moneyfacts, while five-year fixed rates hit 6.35 per cent.
That said, mortgage rates still remain far higher than borrowers had enjoyed prior to the surge in 2022.
Roughly three years ago, the averages were hovering around 2.5 per cent for a five-year fix and 2.25 per cent for a two-year.
In fact, as recently as October 2021, some of the lowest mortgage rates were under 1 per cent.
Will mortgage rates go down or up?
Forecasts are tricky game at the best of times and interest rate expectations change regularly.
Mortgage borrowers on fixed rate deals should worry less about where the base rate is today, and more about where markets think it will go in the future.
This is because banks tend to pre-empt base rate movements. Lenders change their fixed mortgage rates on the back of predictions about how high or low the base rate will ultimately go and how long it will stick there.
In 2023, forecasts for where the base rate would eventually peak fell from a high of 6.5 per cent to 5.25 per cent, mortgage rates shifted with this.
At the start of 2024, markets were pricing in six or seven base rate cuts, with investors betting on rates falling to 3.75 per cent or 3.5 per cent by Christmas.
And we now know how that ended up. Base rate ended the year at 4.75 per cent.
Now, in 2025, markets are now suggesting that base rate will be cut two more times this year and fall to 4 per cent – but based on last year’s performance, these should all be taken with a pinch of salt.
Borrowers due to remortgage should stay on top of rate forecasts but also look to lock in some certainty as soon as they can.
New fixes can be arranged through brokers around six months in advance, with the fees added to the loan and no upfront cost. There is no obligation to take the mortgage if rates fall – instead you could swap for a better deal – but you will have it in your back pocket if you need it.