UK homeowners suffering from high mortgage rates now have a glimmer of hope as the best five-year fixed rate mortgage has fallen to 3.75%. However, the question on everyone’s mind is whether or not mortgage rates will continue to fall.
The mini-budget announced last fall created chaos in the bond market, causing a sharp increase in the cost of borrowing, which directly affected fixed mortgage rates. There was uncertainty about how long the price decline would last, but most brokers and market experts expected it to stabilize somewhere between 4% and 5% through 2022.
However, at the start of February we saw five-year fixed mortgages drop below 4% as HSBC and Virgin Money issued rates of 3.99% and 3.95% respectively. This led to a declaration of a “mortgage price war” by real estate commentators as lenders fight to attract clients.
Now Platform, part of The Cooperative Bank, has announced five-year fixed rates starting at 3.75% effective Monday, February 20. Mortgage market watchers are now wondering if interest rates will continue to fall and fall below 3.5% in five-year reforms.
A mortgage technical director said, “The platform has a history of destabilizing major banks in the market. The platform had one of the lowest five-year fixed rates on the market in October 2021, at 0.79%. Platform pricing has not set the challenge on five-year fixed pricing alone, But also their two-year fixed rates that hover above 4% also provide an interesting proposition for homeowners, who may have felt that long-term fixed rates were their only option at a decent price.