The news we have all been waiting to hear! Finally, 5-year fixed mortgages are below 6% again. The first time this has happened in almost 2 months. Does this signal a drop in all products is on the horizon? Or is this just an anomaly?
The average 5-year fixed mortgage product in the UK has sensationally dropped below 6% for the first time since the mortgage market was thrown into chaos two months ago. We dream of the day when we can stop talking about the disastrous mini-budget in our articles but, unfortunately the impact that the ill-thought-out plan had will undoubtedly go down in history as one of the UK’s biggest financial blunders.
What Happened With Mortgage Rates This Year?
For anyone who doesn’t understand what exactly happened, the former prime minister’s government announced a mini budget that cut taxes which really shouldn’t have been cut. The Bank of England really didn’t want taxes to be cut as they try to tackle the UK’s high inflation so in response, they immediately increased their base rate. Seeing the panic that the BOE was in, mortgage lenders followed suit and bumped up their rates to significantly high levels or even completely stopped lending.
For a few weeks, the mortgage market was in a complete state of chaos as people went from having a sub 2% mortgage rate to over 6% and the prime minister and her chancellor both lost their jobs.
What Has Happened With 5-Year Mortgage Rates?
Now that the financial situation has settled a bit more, we are seeing lenders lowering their rates. Average rates for 2, 3, 5 and 10 year fixed products are still much higher than they were a few months ago but they are looking a lot more encouraging to borrowers and brokers alike. Financial data provider moneyfacts has revealed over the last few days that average 5-year fixed rate mortgages have dropped below 6% for the first time since all of this kicked off several weeks ago. And they may still fall further in the not-so-distant future.
The average five-year mortgage went down to 5.95% on Tuesday the 22nd of November according to Moneyfacts. This is down from 6.51% in October. The average rates for 2-year fixed products have also dropped from 6.65% in October to 6.14%.
A representative from Moneyfacts Rachael Springall has commented:
“Borrowers who paused their home ownership plans, or indeed parked the idea of refinancing, may now be tempted to scrutinise the latest deals on offer. However, it is worth noting that rates could fall further still, but there is no clear answer as to how quickly that may be.”
So, what does this mean in our opinion as brokers? It means that the future looks bright to us! We have always had confidence that the market will spring back, and the rate reductions are proof in our eyes that this will happen quicker than expected. We maintained the belief that lenders ‘over increased’ their rates when the mini budget was released and are already starting to realise that it was a bit of an overkill. If the BOE’s plan to reduce inflation works, we should expect to see rates coming down and hopefully borrowers returning to the market. It may take 12 to 18 months for rates to come right down but we have all the confidence that the market will become a much more stable place.
If you or anyone you know is interested in dropping mortgage rates, please feel free to give our team a call today to see how we can help.