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Prices for 5 year mortgages fall below 4%

 Interest rates on five-year fixed mort­gages are set to drop below 4 per cent after the Bank of Eng­land

House

sug­ges­ted infla­tion might come under con­trol sooner than expec­ted, brokers say. On Thursday, the bank raised its bench­mark interest rate by half a per­cent­age point to 4 per cent in response to high infla­tion. Lenders, which set prices for their fixed mort­gage deals using fin­an­cial mar­ket expect­a­tions about future base rate move­ments, had already priced in the latest tight­en­ing of mon­et­ary policy. But after the BoE’s meet­ing, mar­ket expect­a­tions of future rate increases dropped fur­ther.

The change in expect­a­tions in the overnight index swap mar­ket, which fol­lows BoE decisions, sug­gests the aver­age cent­ral bank rate over the com­ing two years will be 3.75 per cent, down from 4.34 per cent at the start of Janu­ary. Likewise, the aver­age BoE rate over the com­ing five years is now 3.21 per cent, down from 3.93 per cent in Janu­ary. Ray Boul­ger, man­ager at broker John Charcol, said he expec­ted lenders to move quickly to improve their five-year fixed deals, where the low­est rates are around 4.2 per cent. «There’s a clear abil­ity in the mar­ket now to offer a five-year fixed rate at sub-4 per cent».

After the tur­moil that fol­lowed then prime min­is­ter Liz Truss’s «mini» Budget in Septem­ber, rates on many fixed deals rose above 6 per cent. However, the aver­age rate on two-year fixed contracts has fallen to 5.43 per cent, from 5.77 per cent at the start of 2023, accord­ing to the fin­ance web­site Money­facts.

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  1. Kyle4 February 2023 at 14:34

    Oh, that mini Budget. The UK has had some really incompetent and/or unprepared people leading them lately, haven't they? And things are not going to go better anytime soon.

    ReplyDelete

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