What Next For UK Mortgage Rates?

The ever-tightening cost of living crisis and continued soaring inflation – which stood at a staggering 9% in the 12 months to April – is fuelling the likelihood of more interest rate rises this year, putting further pressure on the monthly budgets of millions of mortgaged UK homeowners.

What’s happening with interest rates?

The Bank of England raised interest rates to 1% on 5 May. It was the fourth rise since December 2021, when Bank rate stood at just 0.1% and will add around £300 a year onto the cost of a £200,000 mortgage (2.25% variable rate).

The next interest rate decision will be on 16 June, when the Bank may well decide to raise rates again in the continuing battle against inflation, which shows little sign of abating.

Existing Bank rate-linked mortgages, such as base rate trackers mirror interest rate rises, while the cost of many new fixed rate deals have already factored them in.

As well as climbing mortgage rates, those looking to buy or move home are also facing asking prices at 10.5% higher in May compared to just 12 months ago, according to the latest house price report from Halifax. However, this was the lowest annual house price inflation recorded this year.

Fixed rate mortgages

According to mortgage brokers, including our partner Trussle, an increasing number of homeowners are now opting for longer-term fixed mortgages in a bid for stability. But while historically, borrowers would pay more to fix in for longer, the price gap is closing.

Amanda Aumonier, head of mortgage operations at broker Trussle, said: “Long-term mortgage deals are very competitive at the moment. There is just 0.45% interest separating a 2-year fix from a 10-year fix. And with interest rate hikes all but a certainty, buyers might want to think long term when selecting their mortgage deals.”

You can find more mortgage news at our mortgage updates page. And to see what deals are available today for your deposit level and circumstances, refer to our mortgage tables below.

Why are interest rates rising?

The Bank of England’s Monetary Policy Committee (MPC) uses interest hikes as a tool to cool the economy and tame soaring inflation. And the Consumer Prices Index (CPI) measure of inflation surged ahead by 9% in the 12 months to April 2022, marking its highest level for 40 years.

It reflects both the uncertainty around the Russian invasion of Ukraine, as well as the UK’s energy price cap which climbed by 54% in April to £1,971 and will climb again in the autumn.

What are today’s mortgage rates?

With a frequently-mobile Bank rate and inflation rate, keeping track of mortgage costs is challenging – especially given they can change on a daily basis. One simple way is use our mortgage tables, powered by Trussle – a trusted online mortgage broker and our mortgage partner.

To find out what deals are available at today’s rates for the kind of mortgage you’re after, you’ll need to enter your personal criteria into the table below. Here’s what to do:

  • Select whether the mortgage is to fund a house purchase or if it’s a remortgage for an existing property
  • Enter the property value and the mortgage amount you require. This will automatically generate a percentage which is known as your ‘loan to value’. The lower your loan to value, the cheaper the mortgage rates available
  • Tick the relevant box if it’s a buy-to-let or interest-only mortgage (you’ll need a repayment strategy in place for these deals), or if you’re looking for a mortgage to fund a shared ownership property
  • Finally, filter your search by the type of mortgage you want, for example a two- or five-year fix or tracker. The filter is set to a complete mortgage term of 25 years but you can change this if required.

What else do I need to know?

Mortgage deals offering the cheapest rates usually come with fees attached. You can opt to pay these upfront or add them to the loan. To factor in the cost of the fee, order your the results by ‘initial period cost’ (in the ‘Sorted by’ dropdown).

Alternatively, you can order results by initial rate, lowest fee or monthly repayment – even by the lender’s ‘follow on’ rate that the deal will revert to at the end of the term.

While mortgage rates change daily, the very cheapest are reserved for bigger deposit amounts, usually of 60% of the property value or more. And in all cases you will need a sufficient income and clean credit history to be accepted for a mortgage.

If you want to see what your monthly mortgage payments might look like in different scenarios while overlaid with household bills, our mortgage calculator will do the sums.

While Trussle lists around 12,000 mortgage deals from 90 lenders – which accounts for the vast majority of the market – occasionally some deals are available exclusively through a handful of brokers, so you may not see these listed.

When can I start a remortgage?

Mortgage offers from the major lenders tend to last for six months (as set out in our Best Lenders For Remortgaging), although some lenders cap expiry dates at three months. If you are looking to remortgage your current home, this means you can lock in a rate you see today – at no cost and with no strings attached.

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