Sam Walker
Homebuyers have been dealt a slight boost after average mortgage rates fell below 5% for the first time since September.
Average home loan rates dropped to 4.99% on November 3, down from 5.01% on October 1, according to comparison website Moneyfactscompare.co.uk.
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It marks the first time overall average rates have been lower than 5% since September 3 – two months ago.
Springall said the average mortgage rate dropping below 5% was a “notable milestone” but warned it “remains uncertain on how long this can be sustained”.
Mortgage rates, generally, have been on a downward trend since Liz Truss’ mini-Budget in 2022, which saw rates surge due to a rise in UK government borrowing.
Which mortgage lenders are lowering rates?
A string of banks have lowered rates over the past week, including Barclays, NatWest, Santander, Halifax and HSBC.
Santander slashed rates across its residential fixed deals including its Home Mover and New Build Home Mover ranges on November 3.
Rates have been cut by up to 0.1 percentage points on deals ranging from 75% Loan to Value (LTV) to 95% LTV.
Meanwhile, Barclays reduced rates across 10 of its deals ranging from 60% LTV to 95% LTV on October 31. Rates have been cut by up to 0.13 percentage points.
Looking to remortgage? We reveal how to get the best deal.
What is the forecast for mortgage rates?
The BoE projected a cautious stance after maintaining base rate in September, with the committee voting 7-2 to hold. Two members voted to reduce base rate by 0.25% to 3.75%.
The MPC said it was focused on “squeezing out any existing or emerging persistent inflationary pressures” while maintaining a “gradual and careful approach” to reducing interest rates.
However, lower-than-expected inflation in September, which currently sits at 3.8%, and unemployment picking up to 4.8% between June and August could prompt the BoE to lower interest rates when it next meets on November 6.
Lenders tend to price in mortgage cuts in anticipation of potential rate cuts, hence why rates are falling now.
Nicholas Mendes, mortgage technical manager at the broker John Charcol, said: “Markets are leaning toward a small cut this week, with the bigger picture being a shallow easing cycle rather than a plunge.”
He pointed out five-year SONIA swaps are also falling, sitting around 3.5%.
Falling SONIA swap rates make it cheaper for lenders to secure funding which can lead to lower fixed-rate mortgage rates for customers.
Five-year SONIA swaps are currently around 3.5%, down from around 3.8% a month ago.
In the longer term, while a small majority of economists polled by Reuters predict no reduction in base rate for the rest of 2025, a majority expect two rate cuts by the middle of 2026.
Meanwhile, HSBC’s interest rate prediction is that the base rate will fall to 3% by the end of 2026.
Mendes added: “The forward curve points to funding costs dipping a touch into 2026 then flattening.
“My base case is five-year fixes holding in a 3.75 to 4.25% range, and two-year fixes around 4.25 to 4.75%.”
Should you fix your mortgage?
If the last three years of rises and falls have told us anything, it's that predicting falls in mortgage rates is not an exact science. So, if you have one of the estimated 1.6 million fixed mortgage rates that is expiring this year, should you opt for another fixed deal?
Mendes said: “If you value certainty and plan to stay put, a five-year fix just under 4% is a sensible hedge.
“You are locking near what looks like the cycle floor without trying to pick the absolute bottom.”
For those with more appetite for risk, you could lock in a two or three-year fixed or tracker deal with no early-repayment charge, but only if you have a cash buffer and “clear plan to switch quickly if pricing turns”, he said.
The upcoming Budget might be another reason to lock in a fixed deal now, to shield yourself from any potential fallout.
Omer Mehmet, managing director at Trinity Finance, a mortgage broker in southeast London, said: “With the Budget looming, now may be a good time for borrowers to lock into any rates now in case the Budget sends them spiralling upwards again.”
What about variable mortgage rates?
Just over 1 million homeowners are on variable-rate mortgages, which are linked to the Bank of England’s base rate, according to UK Finance. This includes tracker deals and standard variable rates (SVRs).
The average SVR is an eye-watering 7.27%, according to Moneyfacts. The average two-year tracker costs 4.66%.
Those on a high SVR would be wise to switch onto a fixed rate now. Even if fixed rates fall this year, the money saved from getting rid of an expensive SVR earlier could make it worth it.
Anyone holding out for interest rates to fall further could opt for a tracker mortgage.
David Hollingworth, of mortgage broker London & Country, said: “Anyone that is sitting on a standard variable rate because they are hoping for more drops in fixed deals should consider whether a tracker would be a better option.
“The SVR is likely to be substantially higher and even if fixed rates do reduce over time, each month on SVR could be costing a lot more.”
What about buy-to-let rates?
According to Moneyfacts, the average two-year buy-to-let mortgage rate is 4.79%, while the average five-year BTL rate is 5.18%.
These rates seem quite competitive compared to how high they have been over the past few years. Buy-to-let mortgage rates were pushing 7% in the summer of 2023.
Landlords will be hoping for a further fall in mortgage rates this year, to help offset the 5% stamp duty surcharge and less generous mortgage interest tax relief.
There is also speculation that the Treasury is considering targeting landlords in the Autumn Budget by applying National Insurance to rental income.
What mortgage support is available?
Mortgage rates are much higher than when many people would have last remortgaged. Millions of homeowners will be coming off rates as low as 1% or 2%.
If you’re struggling to make your mortgage repayments, the good news is that lenders representing 90% of the mortgage market have signed up to the government’s mortgage charter. They include the big banks like Halifax, HSBC and Santander and building societies like Nationwide, Leeds and Skipton.
The charter is a series of support measures intended to help those in difficulty. Borrowers will be able to make a temporary change to their mortgage for six months to give them some breathing space, such as switching to interest-only payments or extending their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within six months by contacting their lender.
About 1.7 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to the City watchdog.
Meanwhile, there is a 12-month delay before repossession proceedings can start against those who have missed payments. Regardless of whether your lender has signed up to the charter, all lenders also have a range of measures in place for customers experiencing difficulties.
Should I overpay my mortgage?
If you’ve got some spare cash and you're on a low rate, overpaying your mortgage can be a good way to protect yourself before your mortgage deal expires and you have to remortgage at a higher rate.
Our mortgage overpayment calculator shows how your monthly repayments will change and help you decide if it is worth it.
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