Predicting changes to the base rate has always been as fraught with difficulties as predicting a Grand National winner, and with almost as many variables coming into play. Alun Evans, a Partner at our Haverfordwest office, discusses how changes to the base rate have impacted mortgage rates and provides an insight into the steps mortgage-seekers should take to ensure they get the best deal available.
However, after a period of great uncertainty in the mortgage market this year, and with multiple base rate increases by the Bank of England during 2022, many are predicting that this upward trajectory will peak in May 2023. So, it might be wise for private and commercial buyers to keep their powder dry for a few more weeks until autumn.
The latest change, on 23 March 2023, brought the base rate up to 4.25 PC – an unwelcome hit for many mortgage owners already dealing with rising fuel costs and other costs of living hikes. The Bank of England’s Monetary Policy Committee is expected to deliver its decision about whether to increase the base rate again on 11 May 2023 and many hope for a gentle tailing off of these costs into the summer and autumn. The current interest rates for mortgages, as of mid-April – and these are subject to change – are on average:
- 5.39 percent for a two-year fixed mortgage based on 75 percent LTV
- Five-year fixed rate mortgage in the UK of 4.84 percent, based on 75 percent LTV
- Two-year variable rate mortgage of 4.84 percent based on 75 percent LTV
- The average standard variable rate in the UK is 7.74 percent
Many are predicting a base-rate rise of between 4 and 5 percent in May 2023, but this is subject to change depending on economic conditions. Of course, May’s announcement will be affected by the level of inflation and by the status of the global economy. Be aware too that a hike in the base rate does not necessarily mean that mortgage rates will increase. Fixed mortgage rates have actually declined since November 2022 despite base rate rises. We are also seeing lenders responding to a slow, and in some respects a spooked marketplace, with buyers and borrowers wary after seeing recent turbulence in the commercial and private property market. To counter this, many lenders are working to offer the best deals they can, in order to beat their competition.
With conditions for buyers still unsettled and uncertain, it is wise for both private and commercial mortgage seekers to take advice from a professional financial advisor, who can detail all the options available to you as a buyer, including fixing your mortgage rate, locking in a new rate if you are due to re-mortgage or opting for a shorter term deal.
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If you require further advice regarding the above or any other accounting or tax matter, please contact Alun or your usual Bevan Buckland LLP representative to discuss your circumstances in more detail.