Mortgages rates could fall to below 4 per cent by the start of next year, experts have told i.
Hopes are rising the property market may be past the peak of rising rates, giving optimism to homeowners who are due to remortgage or those hoping to get on the property ladder.
The predictions come as the Bank of England prepares to decide whether to maintain the base rate of interest, which currently stands at 5.25 per cent, in its announcement next Thursday.
Several lenders have cut mortgage rates further this week, as markets predict that the base rate will stay at 5.25 per cent before falling towards the middle of next year.
When will mortgage rates go down?
Financial markets forecast three decreases to the base rate next year, leading to growing confidence in the mortgage sector that mortgage rates will come down.
Aaron Strutt of brokers Trinity Financial Services told i: “Although it is not possible to get below 4 per cent for new mortgages quite yet, we may well see them early next year.”
Nick Mendes, a broker at John Charcol, added: “We should see more lenders release five-year rates below 4.5 per cent, with best buys edging closer to 4 per cent. Two and three-year fixed rates will also come down to 4.5 per cent.”
The average five-year mortgage rate fell below 6 per cent for the first time since mid-June on Friday. It is now 5.99 per cent, while the average two-year rate sits at 5.6 per cent, according to data analytics firm Moneyfacts. However, there are many deals on offer available below these levels.
Nationwide, one of the nation’s biggest lenders, now offers a five-year fixed rate of 4.29 per cent for people with a 40 per cent deposit, charging a £999 fee. This is now nearly one percentage point below the current base rate.
Santander also now offers a five-year fixed rate, also with a 40 per cent deposit, for 4.39 per cent.
David Hollingworth of brokers L&C Mortgages, said: “I think we could see rates of below 4 per cent in the first quarter of next year.
“But inflation figures will have a big bearing on movement and any surprises in data could reverse the current trend. I expect that rates will bottom out at some point.”
Predictions could also be thrown off course by the prospect of a general election next year, as it tends to result in people holding off buying a property until they know the result.
This is because elections can cause volatility in the markets which could have a knock on effect on mortgages rates.
Mr Mendes said: “Markets need stability. New government and policies can alter the direction which cause unease. As we have seen previously with the current government sudden how quickly markets can turn.”
When should I get a new deal?
Many people have been put off buying a property, or even remortgaging, hoping that rates will come down even further.
However, those who do want to buy now are encouraged not to wait, especially if they have found their perfect property.
Mr Mendes said: “Buying a property is an emotional decision, with long-term considerations. Property prices will inevitably fluctuate, but history shows that in the long term, homeowners will be financially better off.
“If you find a property that fits your needs and is affordable than don’t hesitate to purchase, it’s impossible to pre-empt the perfect conditions both in terms of mortgage rates and property prices.”
If your current deal is ending, typically six months prior to the end of your fixed-rate or initial products period is the best time to start looking for a new deal.
If rates go up you’ve secured the best terms, whereas if they continue to decrease you can switch to a cheaper rate with your current lender, or start an application with a new lender.