The ever-tightening cost-of-living crisis and skyrocketing inflation – which stood at 9% in the 12 months to April – are fueling the likelihood of another interest rate hike. interest this year, putting additional pressure on the monthly budgets of millions of mortgage borrowers. British owners.
What’s going on with interest rates?
The Bank of England raised interest rates to 1% on May 5, which will add around £300 a year to a £200,000 2.25% variable rate mortgage. The next interest rate decision will be on June 16, when the Bank may well decide to raise rates again in a continued fight against inflation which, after the latest April figures, shows few signs of shortness of breath.
Existing mortgages linked to bank rates, such as base rate trackers, reflect interest rate increases, while the cost of many new fixed rate transactions will have already factored in any increases. May’s hike is the Bank Rate’s fourth since December 2021, when it was just 0.1%.
Fixed rates 2 and 5 years
According to mortgage brokers, including our partner Trussle, an increasing number of homeowners are now opting for longer-term fixed mortgages in a ‘stability offer’, with five-year terms being particularly popular.
But whereas historically borrowers would pay more to repair for five years than for two, the price gap is narrowing. In fact, Halifax offers a five-year fixed rate mortgage that is cheaper than its two-year fixed rate equivalent. The five-year “no-fee” solution is priced at 2.93% for borrowers with a deposit of 40% or more, compared to a rate of 3.01% for the same transaction over two years.
You can find more mortgage news on our mortgage updates page. And to see what deals are available today for your deposit level and situation, check out our mortgage tables below.
Why are interest rates rising?
The Bank of England’s Monetary Policy Committee (MPC) is using interest hikes as a tool to cool the economy and bring soaring inflation under control. And the consumer price index (CPI) measure of inflation jumped 9% in the 12 months to April 2022, marking its highest level in 40 years.
This reflects both the uncertainty surrounding the Russian invasion of Ukraine, as well as the cap on UK energy prices which soared 54% in April, driving up energy bills for millions of households. The cap will rise again in October, when analysts expect at least an additional £500 will be added to the cost of a typical annual energy bill.
What are today’s mortgage rates?
With a frequently moving bank rate and inflation rate, it is difficult to keep track of mortgage costs, especially since they can change daily. An easy way is to use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.
To find out which offers are available at today’s rates for the type of mortgage you are looking for, you will need to enter your personal criteria in the table below. Here’s what to do:
- Indicate whether the mortgage must finance the purchase of a house or if it’s a mortgage for an existing property
- Enter the property value and the mortgage amount you need. This will automatically generate a percentage which is known as your ‘loan to value’. The lower the value of your loan, the lower the mortgage rates available
- Check the appropriate box if this is a purchase for lease or interest-only mortgage (you will need a repayment strategy in place for these transactions), or if you are looking for a mortgage to fund a shared ownership goods
- Finally, filter your search by type of mortgage you want, for example a patch or a two- or five-year tracker. The filter is set to a full mortgage term of 25 years, but you can change it if needed.
What else should I know?
The mortgage offers offering the cheapest rates usually come with fees. You can choose to pay them upfront or add them to the loan. To account for the cost of fees, sort your results by “initial period cost” (in the “Sorted by” drop-down menu).
Alternatively, you can sort the results by initial rate, lowest fee, or monthly repayment – even by lender’s trailing rate the deal will revert to at the end of the term.
While mortgage rates change daily, the cheapest are reserved for larger deposits, typically 60% of the property’s value or more. And in any case, you will need sufficient income and a clean credit history to be accepted for a mortgage loan.
If you want to see what your monthly mortgage payments might look like under different scenarios while stacked against household bills, our mortgage calculator will do the sums.
While Trussle lists around 12,000 mortgage deals from 90 lenders – representing the vast majority of the market – some deals are sometimes available exclusively through a handful of brokers, so you might not see them.
When can I start a mortgage?
Mortgage offers from major lenders tend to last six months (as featured in our Best Lenders for Remortgage), although some lenders limit expiration dates to three months. It’s worth researching a new mortgage this far in advance because you’ll be able to lock in a rate you’re seeing today – with no fees and no strings attached.