Mortgage rates have been volatile recently, despite a cut in November 2024, and with ongoing uncertainty surrounding when interest rates might start to fall more consistently how do you get the best deal?
Inflation is expected to remain higher for longer, prompting speculation that we might see the Bank of England hold rates where they are for another few months yet.
Unless you’re the kind of person who scours the mortgage best buy tables daily, you might not have noticed that several mortgage lenders, including Nationwide, NatWest, Santander and HSBC, have raised their interest rates lately.
Average rates on two and five-year fixed mortgages stood at 5.39% and 5.09% respectively in November 2024, according to data from the Moneyfacts UK Mortgage Trends Treasury Report, although the good news is they are lower than they were at the beginning of the year.
The way mortgage lenders work in the current market means you have to be quick to move if you spot a good deal, and work a bit harder to find the best rates.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
How to spot a good mortgage deal
Mortgage lenders always keep a close eye on their rivals’ rates; if one lender raises its rates, others typically do the same to make sure they aren’t overwhelmed with applications. But that changed at the start of the year, with mortgage lenders cutting rates to become more competitive and to attract customers.
Although average two and five-year fixed rates remain above the 5% mark, there are still good deals to be found, with best buys available below 4%. Bear in mind that rates rarely fall across a lender’s full range of mortgages. If a bank wants to increase the number of five-year fixed rate mortgages it sells, it will often tweak that rate while leaving the rest alone.
Deals can be withdrawn quickly too, so don’t hang around if you see a deal you like. Lenders always keep one eye on the amount of business they generate by reducing rates and may pull deals fast if they receive a large number of applications.
Remember too that you should always look at the overall cost of any deal when considering how competitive it is, rather than focusing on the headline rate alone. Find out more about this in our guide Why the lowest rate mortgage may not be the cheapest deal.
It’s still the case that the more equity or the larger the deposit you have, the better the rate you’ll get, but these days you may qualify for the best rates with a 30% or 35% deposit/equity, rather than the 40% needed some months ago.
Should I go for a tracker or fixed rate mortgage?
You’ll currently pay more if you opt for a tracker rate mortgage, which tracks the Bank of England base rate plus a set percentage, compared to a fixed rate mortgage, because interest rates are expected to fall in coming months.
For example, at the time of writing, NatWest has a two-year fixed rate mortgage deal at 3.99%, which is available on mortgages up to 60% loan to value. However, in comparison, Halifax’s best buy two-year tracker deal, which is 0.08% over base rate, and means you’d currently be paying 4.83%, is almost one percentage point more expensive. This deal is again available on mortgages up to 60% loan to value.
Because the rate difference is significant, most borrowers may find they are better off with a fixed rate for now – although the reverse could end up being true if the base rate reduces. That means you need to weigh up how important it is for you to have budgeting certainty. Learn more in our article Should I go for a fixed or variable rate mortgage?
Teddy Cenaj, mortgages expert at Habito said: “The majority of people choose a fixed rate mortgage for the security they offer, as it’s important to have control over the biggest outgoing in most people’s lives. The small percentage of people who choose a variable rate mortgage do so for a variety of reasons, such as they don’t want early repayment charges or are looking to sell soon.”
Tips to secure a great mortgage deal
Before the credit crunch (which seems like a lifetime ago), getting a mortgage was child’s play, but even though lenders are now much less terrified of the prospect of lending money, they’re still examining applications carefully.
Try the following to secure a great deal:
Start looking early: If you’re remortgaging, you should start looking for another mortgage deal at least three months but preferably six months before yours comes to an end.
Get the biggest deposit you can: If you’re close to a threshold (for example, you have a deposit of 23% or 24%, but not 25%), consider saving for a bit longer to make up the difference.
Take advice on the best way to secure the most competitive rate: These days getting a mortgage is as much about matching what a mortgage lender is looking for in a borrower with your circumstances as it is about spotting the cheapest deal on best buy tables. It’s therefore usually a good idea to seek professional mortgage advice from a broker who will be able to help you find the right deal to suit your needs.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
What will happen to mortgage rates in 2025?
Predicting what will happen to mortgage rates is always a risky business, as no-one knows what the future holds, but the signs are that there may be fewer competitive deals later this year if the base rate doesn’t come down further.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Mortgage rates have been on the rise since the Budget and the US election. Movements haven’t been seismic, but they’ve edged up from 5.39% to 5.42%, halting the steady path of cuts we’ve enjoyed for the past few months. Today’s cut is unlikely to turn the tide.
The Bank and the market are both focusing further ahead, on the fact that the extra spending and borrowing in the Budget – plus the threat of US tariffs – could mean inflation returns at a more significant level. The Bank says it’ll keep an eye out for inflationary risks, and the market is pricing in fewer cuts between now and the end of 2025. We’re likely to see some repricing to reflect that – so mortgage rates could rise again.”
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
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