Mortgage rates have experienced a significant decline since reaching their peak in the summer, following a sustained period of base interest rate stability by the Bank of England since August. However, the repercussions of the previous high mortgage rates are still evident, impacting house prices.

The Bank of England implemented multiple consecutive interest rate hikes over the past two years to curb escalating inflation, leading to a significant surge in mortgage rates. Although rates have decreased in recent months, with the average two-year fixed rate currently standing at 5.99%.

What are the latest UK mortgage rates?

With the Bank of England maintaining the base interest rate at 5.25% for the second consecutive time in November, mortgage lenders likely factored in this decision. Several prominent and smaller lenders have responded by reducing their rates since August, aiming to attract customers amidst a slowing housing market.

Why are mortgage rates decreasing?

Mortgage rates surged throughout 2022 and the first half of 2023 in response to the Bank of England’s efforts to address soaring inflation by raising the base interest rate from 0.1% to 5.25%. However, the decline in inflation in the UK has bolstered the confidence of banks and building societies to lend money at more affordable rates.

Will UK mortgage rates continue to decrease?

While inflation has decreased over the past year, it remains elevated for the Bank of England, standing at 4.6% in the year to October—more than twice the Bank’s 2% target. This suggests that the Bank may continue to reduce interest rates in 2024. Additionally, experts generally believe that interest rates have peaked.

As industry insiders remain cautiously optimistic, anticipating that average mortgage rates could dip below 5% again in 2024 if inflation continues to fall, the landscape of the mortgage market is poised for potential shifts in the coming months.