There is no doubt that interest rates are a lot higher than they have been for some time. It can be a shock to the system when it’s time to renew your deal and suddenly you are paying significantly more. However, if we put the current rates into historical context, they still represent good value for money.
Mortgage interest rates
In recent years, interest rates have been exceptionally low. This has caused us to think that the current increases are higher than they really are. According to Moneyfacts, a standard variable rate mortgage in 2020 was 4.90%* and the average five-year fixed mortgage in September 2023 was 5.67%.** The lowest average mortgage interest rate in the past 25 years was in September 2021 at 3.59%, with the highest being 8.87% in September 1998.*** Current forecasts indicate that they will never fall to the ultra-low levels of the past and that they are rebalancing to historically normal levels.
The bank base rate
September 2023 saw a bank base rate of 5.25% which represents a significant decrease from rates of 17% in 1979, 13.88% in 1990 and 7.25% in 1997. Base rates have risen since February 2022 (0.50%.****) and may rise again, but only slightly, and this should not significantly impact mortgage interest rates. The good news is a falling inflation rate of 6.8% in September 2023 will help to lower interest rates.****
More support
Nowadays, there is more you can to than ever to combat rising mortgage rates. Mortgage support such as interest-only payments and longer terms help a lot of people adjust to more normal rates. In the past, there was little or no assistance, which led to a less stable market. More stability makes for a healthier, predictable housing market which allows you to move between homes without sudden changes. This, in turn, means you can get on with making your move today and feel more secure.
Mortgage options
There are also plenty of products and options to choose from such as porting. This means you can buy a new property with your existing mortgage. Hence, if you are paying a more favourable rate on a fixed term, you don’t have to put off moving. Mortgage providers are also offering longer terms; many mortgage providers offer a 35-year term, while a few offer 40-year terms, and some even more. For first-time buyers, government-backed schemes such as the Mortgage Guarantee Scheme are helping many homebuyers make their first move. If mortgage rates fall in the future, there is also the option of remortgaging.
Final thoughts
Interest rates are getting back to normal, and while they have some way to go, they are not as high as you may have first thought. Buying a home you can be happy in is something you can’t put a price on and if you are still worried about interest rates, then remember that there are so many more options and support available than in past years. This brings about a more stable market, which offers peace of mind and reduces the likelihood of unexpected changes. Using a good agent will ensure you pay the right price for your home. This, combined with your property's unique situation regarding equity and local market supply, among other factors, means a good chat with your agent has never been more important.
Contact us for a valuation, and we will discuss how to achieve all your property aspirations
Moneyfacts*
Rightmove**
Mortgageable***
Bank of England****