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Rates on five-year mortgage deals back below 6%

Homes for sale in an estate agent's window

Fixed mortgage rates spiked after the government's mini-Budget in September, but there are signs that we are past the peak.

Rates have stabilised since the Autumn Statement in mid-November, and new data reveals that the average five-year fixed mortgage rate has dropped below 6% for the first time in seven weeks.

According to financial data provider Moneyfacts, the average five-year fixed rate is now 5.95%.

This is good news for would-be borrowers and is an indication that fixed rates are slowly returning to normality after having priced in uncertainty after the mini-Budget, Moneyfacts said.

The average rate on five-year fixed mortgage deals rose above 5% on 30 September and peaked on 20 October 2022, the day former Prime Minister Liz Truss resigned.

"Borrowers who paused their homeownership plans, or indeed parked the idea of refinancing, may now be tempted to scrutinise the latest deals on offer," said Rachel Springall, a finance expert at Moneyfacts.

Springall added that rates could fall further still, but there is uncertainty over how quickly that will happen.

Rates are still high compared with this time last year, when they were around 2.5%, and currently only a handful of lenders are offering deals below 5%.

"Borrowers may feel they have to be patient for a little while longer yet before they commit to a new fixed mortgage, or even wait until next year to see how the market recovers from the recent interest rate uncertainty," Springall concluded.

The surge in mortgage rates after the mini-Budget forced some first-time buyers to delay purchases and this contributed to an increase in demand for rental homes last month, according to property website Rightmove.

The number of people enquiring about homes to rent was up 23% in October compared with the same month a year ago.

A survey by Rightmove found that 42% of would-be first-time buyers planning to get on the property ladder in the next few years have already saved their total deposit and are waiting for rates to drop. Another 43% are in the process of saving.

"It's completely understandable why some buyers, particularly some first-time buyers, are waiting for some more financial certainty," said Tim Bannister, property expert at Rightmove.

"Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilise at a higher level than previous buyers had been used to."

Posted by Fidelius on November 28th 2022

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