Interest Rates Cut to Lowest Level in Over Two Years

The Bank of England has now cut interest rates to 4%, taking borrowing costs to their lowest level for over two years.

This lower rate reduces monthly mortgage costs, encouraging more buyers to the market that may have been waiting to secure a lower rate, or that were looking to strengthen their financial position before moving forward to accommodate the previous rate.

What does this rate drop mean for new mortgage deals?

Earlier in the year, there was a mortgage price war, as various lenders cut the costs of their fixed-rate deals in order to secure more business from those buyers looking for a lender.

Whilst this has now calmed, the cost of a new deal is still slowly decreasing, with the average five-year, fixed-rate deal this week priced at 5.01%, compared to 5.09% in June.

This is the first time that the average two-year rate has dropped below the five-year since September 2022, and is offering a glimpse of comfort for the market that rates will continue to drop to a more comfortable rate. There are now two-year rates available at as little as 3.73%; however, there are higher deposit requirements to secure this rate.

Is a fixed rate more secure?

A fixed rate can feel like the safer option for borrowers, as if the interest rates were to skyrocket again, you are safe from those increases for your fixed period of your agreement, however, it does then mean you feel no instant benefit from the recent drops.

It's important to remember that even at the end of your term, rates will affect you; so if you have locked into a fixed-rate now, these drops will become beneficial to you when your term ends and your new rate is implemented. Ultimately, the decision is down to the borrower of what rate to move forward with, as it's about what works best for your plans. While the hope is that prices will continue to drop, there is no guarantee of this.

If you're looking to move forward with an investment at these new rates, reach out to our expert team today to find out more about what we have to offer.