Where Are Mortgage Rates Headed And Will They Go Down?

by | Tuesday 18th Oct 2022 | Mortgage Insights

Where are mortgage rates headed?

Where are mortgage rates headed? (Source: Money to the masses)

With the announcement coming out of parliament today that the new chancellor Jeremy Hunt will backtrack on almost all of the previous chancellor’s tax cut announcements from the mini budget, a lot of people have been asking “where are mortgage rates heading?”.

In our opinion, nowhere but up for the time being. Sorry if that is not the answer that you want to hear but unfortunately it is the reality right now. Mortgage rates went up because the Bank of England increased the base rate due to rising inflation and the drastic and misjudged tax cuts that the previous chancellor announced in his mini budget. The banks (including the BOE) need to regain confidence in the market before rates can start to come down again.

Yes, mortgage rates at the moment are the highest that many of us have seen in years but, remember that we have just come out of a period of extremely low interest rates. Normal rates were never as low as they had been over the last few years. I remember a former work colleague of mine telling me that when he get his first mortgage in the early 2000’s, his interest rate was 11%. A far cry from the around 6% interest rate average right now. We do expect interest rates to go down again but we think that people should prepare for higher interest rates and a challenging economy for at least a year.

Experts Opinions

An article from themortgageratesreports.com collated some predictions from finance experts yesterday and here are some of the most insightful opinions in our eyes:

Joel Kan, associate vice president of industry surveys and forecasts at the Mortgage Bankers Association says:

“We expect mortgage rates will remain volatile but elevated as markets continue to grapple with economic uncertainty and tighter monetary policy from the Federal Reserve. However, a strong job market and wage growth offer a slight reprieve and will continue to support housing demand.”

CEO of Alliance Fund, Iain Crawford says:

“Although today’s U-turn is an attempt to calm the waters, it’s fair to say that the government’s shambolic behaviour is unlikely to distil much confidence in the UK economy. However, as it stands, the UK public will embrace any shred of stability afforded to them in what are currently very uncertain times and the one silver lining of this latest government backtrack should be a boost to property market confidence. We’re already seeing a strengthening of the pound with gilt yields also dropping and this easing pressure on the markets should reduce the likelihood of higher interest rates. This will help settle what has been a turbulent mortgage market in recent weeks, rejuvenating buyer demand levels, which will also help to stabilise house prices and investment into the UK property market.”

Oportfolio’s Advice

So, in summary, we think we won’t see a significant drop in mortgage rates for a little while. But it will happen at some point. Until then, your main priority is to make sure that you are comfortable with your finances and your mortgage is in the best position possible to deal with any economic issues or rate rises that might be coming. Give our team a call today for a free initial mortgage and/or insurance consultation to see how we can help you.

We're Here to Help

If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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