Majority ‘will struggle’ to find sub-4% mortgage this year
Mortgage rates of below 4 per cent are unlikely to be available again this year for the vast majority of households, experts have warned, after the Bank of England held interest rates again this week.
The cheapest mortgage rates on the market were under 4 per cent at the start of the year, when the base rate was predicted to fall as early as March, but these deals have since been pulled.
Economists’ predictions on when interest rates will be cut differ but many have suggested June, August or even later.
The predictions have prompted a rise in swap rates – the lending rates between banks that have a major impact on the pricing of mortgages – and the lowest available deals are now sitting above 4.3 per cent.
But these are available only to those with large deposits or equity in their home of 40 per cent or more, known as lower loan-to-value (LTV) customers.
Some experts believe this means mortgage rates could stay high for some time. Aaron Strutt, of brokers Trinity Financial, said: “The fixedrate price hikes may well be a blip, but even if the base rate comes down, it seems unlikely rates will fall below 4 per cent for quite some time.” While rates were held for the sixth time in a row at 5.25 per cent on Thursday, Andrew Bailey, the governor of the Bank of England, signalled cuts could come as early as June. Despite his optimism, mortgage experts warned that there was little prospect of a significant reduction in borrowing costs for homeowners. “The lowest two-year fixes for those with a 40 per cent deposit now start from 4.77 per cent and five-year fixes from 4.4 per cent,” Mr Strutt said.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “By the end of the year I would expect a two-year fixed rate in the region of 4.1 to 4.2 per cent, and a five-year fixed rate between 3.7 and 3.9 per cent for lower LTVs.
“Those with less equity in their homes or with a lower deposit will be marginally below best buys.”