Bank of England mortgages interest rates

Mortgage market sends mixed messages as base-rate rise looms

This Thursday, the Bank of England is expected to announce whether or not it will be upping the base rate from its current 0.5%, and mortgage lenders have already been tailoring their rates.

Low-interest rates and a slowdown in property price rises have opened the door to many homebuyers in recent months. June saw a total of 65,619 new mortgages to fund a property purchase, the highest level since January and above the 64,990 average monthly level of transactions over the past 12 months. But the market is expecting an announcement on Thursday with the expectation that the Bank of England will raise interest rates from 0.5% to 0.75%, which will likely slow the property and the mortgage market again.

If the base rate does rise by the expected 0.25%, borrowers on a variable rate mortgage will pay almost £200 a year more per £100,000 of the outstanding mortgage, according to Martin Lewis, founder of

Take advantage of the low rates

Unusually, so close to an expected base rate rise, Newcastle Intermediaries has announced a cut in rates across its recently expanded mortgage range. Its two-year fixed rate available at a maximum 80% loan-to-value (LTV) has dropped 0.48% to 2.05%, and its five-year rates have been reduced by 0.41% to 2.67% at 80% LTV. Notably, they are considering affordability on a case by case basis to meet the needs of customers with complex incomes and requirements.

It’s a positive move by the lender indicating confidence that rates are anticipated to remain relatively low for now, even with a likely base rate rise imminent. However, market experts are predicting that the time of record-low mortgage rates is nearly over, and borrowers are being urged to take advantage of lower rates while they are still available. Over the past year, the average mortgage rate has been rising slowly; the cheapest two-year fixed rate was less than 1% less than a year ago, while now the most similar deal is approximately 1.35%.

Limited time for incentives

Indeed, Sainsbury’s Bank has just increased the rates across its range of purchase and remortgage deals. For purchases, its two-year fixed rate at 90% LTV has risen to 2.10%, at 95% LTV it’s up to 3.39% and its five-year fixed at 90% LTV is now 2.59%. The remortgage range two-year fixed at 75% LTV has increased to 1.57% and its five-year fixed at 60% LTV is now at 1.92%. However, in contrast, Newbury Building Society has reduced its three-year fixed rate at 95% LTV from 4.29% to 3.99%.

It’s clear that mortgage lenders continue to be fiercely competitive – the onus is on borrowers to take advantage while they still can. Low rates, fee free deals, cashback – all of these are being touted by lenders to attract new business. If a base rate rise is on the cards, there is no guarantee these incentives will be available for long.

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