Mortgage rates increasing again – so do brokers think now is a good time to fix?

In early October, two-year fixed-rate mortgages were as low as 3.84% and five-year fixes 3.68%. However, these have now increased to 4.11% and 4% respectively – even as the Bank of England cut the base rate from 5% to 4.75% last week.

The following is general information from brokers. If you need bespoke advice, speak with a mortgage broker.

1. Why have fixed-rate mortgages stopped getting cheaper?

David Hollingworth, L&C Mortgages: "The Budget and the US election have added a hint of uncertainty around future rate movements. That has caused a flurry of price changes to feed through with most resulting in fixed rates being hiked."

Aaron Strutt, Trinity Financial: "Lots of people are wondering how rates are going up given the Bank of England base rate came down, but fixed rates do not track the base rate. The money markets had priced in funding cost reductions and probably lower inflation. Rates were getting cheaper but the Budget threw a spanner in the works."

Nicholas Mendes, John Charcol: "This trend is being driven by a combination of rising swap rates [which mortgages are indirectly linked to], increased demand for competitive products, and lenders recalibrating their strategies to balance profitability and service capacity."

2. What will happen to fixed-rate deals in the short term?

Aaron Strutt, Trinity Financial: "Most sub-4% mortgage rates have been pulled now. While rates are going up at the moment, there is a fair chance they will come down again, especially if demand for mortgages slows."

Nicholas Mendes, John Charcol: "By the end of 2024, we expect rates to settle, though the possibility of a return to sub-4% levels will depend on revised market conditions. With no base rate reduction currently priced in for December, a surprise cut next month could prompt markets to reprice and encourage lenders to bring five-year fixed rates back below 4% – offering much-needed relief for borrowers."

David Hollingworth, L&C Mortgages: "Unwelcome as it is for borrowers, it's important to note that there's no sign of rates skyrocketing as they have in recent years. The Bank of England base rate is still expected to fall over time, but markets are questioning if the pace will be as rapid."

3. So is it a good idea to fix now?

Ben Thompson, Mortgage Advice Bureau: "I would always say try and avoid playing the markets when it comes to fixing a mortgage or not, and also with regard to length of any fixed rate. There is no visibility regarding rates plummeting at all currently, so if in any doubt, fix."

Aaron Strutt, Trinity Financial: "If you are applying for a mortgage, it makes sense to secure a rate now. You can monitor the market and try to swap to cheaper deals if they are available before you complete your purchase or remortgage. In a regular market, mortgage rates go up and down – this is going to happen more frequently than many, particularly younger, borrowers have been used to."

David Hollingworth, L&C Mortgages: "Forecasting and perception changes frequently but for now borrowers should grab a rate whilst they can, to avoid missing out if the deal is subsequently withdrawn."

Nicholas Mendes, John Charcol: "Borrowers should act swiftly to lock in deals. Many lenders offer flexibility to switch to better deals if the market improves before completion, which can be a prudent approach in this environment."