Will we see mortgage rates fall below 4% any time soon? There could be light at the end of the tunnel as a dramatic drop in inflation announced last week could mean the end of the rate increases experienced over the past two years.

About interest rates

Rates dropped to an all-time low in March 2020 at 0.1% to try and shield the economy from the impact of coronavirus and remained at that level until November 2021. Then the rise began, by September it was 2.25% and by the end of that year 3.25% – the highest in a decade. Fast forward to November 2023 and the base rate stands at 5.25%, its highest since January 2007. 7.5 million households are expected to have been affected by the rate rises. But with inflation slowing, have we seen the worst of high rates and could mortgage rates start to come back down?

Annual inflation fell to 4.6 per cent in October from 6.7 per cent in September, surprising investors, and the Bank of England.

Many of the country’s major lenders – and quite a few smaller ones, too – have slashed mortgage rates in response to dramatically improved inflation data. At the end of last week there were circa 30 lenders offering a sub 5.0 per cent fixed mortgage compared to 13 at the start of October. Mortgage lenders were already at war with each other on pricing and these inflation figures will only encourage them to go even further, and quicker.

Should I hold our for a lower rate?

With fixed-rate deals expected to improve, many may be tempted to hold out and delay locking into a new rate in the hope that they fall rapidly.

You can secure a new mortgage rate up to six months in advance of your deal ending. Even when purchasing a property if rates improve between application and exchange “most” lenders will allow a change of product. Given the rollercoaster conditions seen over the last two years my advice is to secure a new deal as early as possible. It gives you protection if the market takes a negative turn and if rates improve you can still benefit. Its not uncommon for us to change products on behalf of clients several times before the new deal is in place – it’s the market we are in!

Top tips

• Purchasing a property? Get an agreement in Principle (an indication from the lender of how much they would be willing to lend) Your broker will also be able to give you an indication of cost and rate based on your circumstance.
• Own a property? You can secure rates up to 6 months before your deal comes to an end – worth dusting off the mortgage paperwork and getting a quote.
• Let a professional help. We do this every day and are up to date with what lenders offer and the criteria they are likely to accept.

Thank you Nick Bone, Mortgage Advisor at Nicholas Bone Financial for writing this for our blog and for sharing this advice on mortgage rates with us. For assistance with mortgage queries, or if you are looking for a mortgage broker, you can contact Nick here.