Ultra-low mortgage rates are declining

Jake Carter

November 3, 2021


Ultra-low mortgage rates have been declining amid expectations that the Bank of England base rate could increase soon.

On Thursday, the Bank will reveal whether it will increase the base rate amid pressure from inflation or maintain the existing 0.1% rate for at least one more month.

On October 25 there were 82 fixed-rate mortgages available at 0.84% to 0.99% but by Tuesday this week this had fallen to 22 deals, according to analysis by Defaqto.

Last week the average 2-year fixed mortgage rate for a first-time buyer putting down a 5% deposit was 2.45%. This has jumped over the past week to 2.69%.

Around a quarter (26%) of homeowner mortgages are variable rates according to UK Finance. These deals would be the most exposed to the immediate impacts of any increase in the base rate.

This group includes 850,000 tracker mortgages, with rates that generally follow the Bank of England base rate, and 1.1 million standard variable rates (SVRs).

Around three quarters (74%) of mortgage borrowers are on fixed-rate deals and so would be protected from the immediate impact of any base rate increases.

A quarter point rise in the base rate could mean an extra £26 per month mortgage payment on average for a tracker rate customer and £16 for those on an SVR, according to UK Finance’s calculations

James Tucker, chief executive of Twenty7Tec, said: “The market is clearly pricing in a rate change after recent comments from the Monetary Committee.

“Lenders have slightly reduced the volume of sub-1% products over recent days but many will be waiting to see what happens on the other side of the rate decision.

“They may well reintroduce those products with a slightly higher rate in a couple of days’ time. One things is clear: the speed with which products are updated is quicker than ever and so customers should make sure that they stay in touch with their mortgage experts day to day to see the best rates available.”

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