As of 19 September 2024, the Bank of England’s base rate is 5%, following the first rate cut in over four years in August. Despite inflation briefly hitting the BoE’s 2% target in May, it has slightly ticked up to 2.2%, meaning the economic landscape remains dynamic. Lenders have adjusted their rates in response to these developments, and here’s how things currently stand:
- The average rate for a five-year fixed-rate mortgage is now 4.61%, down from 4.65% last week.
- For a two-year fixed-rate mortgage, the average is 4.98%, down from 5.03%.
- The lowest available two-year fixed rate is 3.99%, while the lowest available five-year fixed rate is 3.77%.
For buyers with different deposit levels, here’s how mortgage rates break down:
| Loan-to-Value (LTV) | Term | Average Rate (19 Sep 2024) |
|---|---|---|
| 95% | 2-year fixed | 5.64% |
| 95% | 5-year fixed | 5.31% |
| 90% | 2-year fixed | 5.41% |
| 90% | 5-year fixed | 4.90% |
| 85% | 2-year fixed | 4.99% |
| 85% | 5-year fixed | 4.65% |
| 75% | 2-year fixed | 4.74% |
| 75% | 5-year fixed | 4.39% |
| 60% | 2-year fixed | 4.20% |
| 60% | 5-year fixed | 3.89% |
These rates give a clear picture of how deposit size (LTV) can influence the interest rates you’re offered. The more you can put down upfront, the better your chances of securing a lower interest rate.
How Do Interest Rates Impact Your Monthly Repayments?
Mortgage interest rates directly determine how much you’ll pay each month. Higher rates mean a greater portion of your monthly payment goes toward interest, leaving less for paying down the principal amount.
For example, with the current average house price for first-time buyers sitting at £227,570, if you took out an 85% LTV five-year fixed-rate mortgage at the average rate of 4.65%, your monthly repayment would be £1,092 over a 25-year term. This is lower than a year ago when the rate was higher, and repayments stood at £1,198.
Fixed vs. Variable Mortgages: Which is Best for You?
One of the biggest decisions you’ll face is whether to go for a fixed or variable mortgage:
- Fixed-rate mortgages offer stability, as your rate is locked in for a set period (2, 5, or 10 years). This can provide peace of mind, particularly in times of economic uncertainty, as you’ll know exactly what your repayments will be. The downside? You may end up paying more if rates fall.
- Variable-rate mortgages, on the other hand, fluctuate based on the Bank of England’s base rate. While you could benefit from lower repayments if rates drop, you’ll also be at risk of your monthly costs rising if rates increase.
In today’s market, where a further cut to the base rate is predicted by the end of the year, variable rates might seem tempting. However, it’s crucial to assess your risk tolerance and financial stability before making a decision.
Securing the Best Deal: Tips to Consider
Here are a few strategies to ensure you’re getting the best mortgage deal:
- Talk to us! Different lenders offer different rates, so it’s essential to compare options, especially in a shifting market. The best person to offer you the best deal is a mortgage advisor. Contact us today to arrange a meeting!
- Improve Your Credit Score: A higher credit score can lead to better mortgage offers, so make sure your credit is in good shape.
- Larger Deposit: The more you can put down, the lower your LTV, which generally translates into lower interest rates and monthly repayments.
Keep in Mind
Mortgage interest rates can have a significant impact on your monthly payments, especially in high-cost areas like London. Whether you’re considering a fixed or variable mortgage, understanding how rates work is key to making the best financial decision.
If you need help navigating the current mortgage landscape, contact IMC Financial Services. Our experts can guide you through the process and help secure the best deal for your unique situation.