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The Forbes Advisor editorial team is independent and objective. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive payment from the companies that advertise on the Forbes Advisor site. This comes from two main sources.
First, we provide paid placements to advertisers to present their offers. The payments we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market.
Second, we also include links to advertisers’ offers in some of our articles. These “affiliate links” may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor.
While we work hard to provide accurate and up to date information at the time of publication that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof. You should always check with the product provider to ensure that information provided is the most up to date.
Published: Sep 30, 2023, 9:00am
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The Bank of England held interest rates at 5.25% in September. The freeze comes after 14 consecutive rises since December 2021, when the Bank rate stood at just 0.1%.
It followed broadly positive news from the Office for National Statistics that inflation continued to fall in August to 6.7% (from 6.8% in July and 7.9% in June). The Bank of England uses interest rate hikes as a weapon to tame rising inflation.
The Federal Reserve, the US equivalent of the Bank of England, also held borrowing costs in September.
Borrowers looking for a new mortgage deal will be hoping that the latest decision by the Bank of England signals the top of a turbulent and painful campaign of interest rate rises.
Mortgage costs first rocketed a year ago after former Prime Minister Liz Truss’ mini-Budget which triggered market uncertainty and sent the pound crashing to historic lows. It caused mortgage lenders across the board to hastily pull deals, bringing them back to market at much higher prices.
While mortgage costs then underwent a correction, during the spring of 2023, there was a flurry of lenders putting up the cost of deals again as Bank rate continued on its relentless climb in the face of soaring inflation.
However, as inflation has continued to cool, the cost of fixed rate mortgages has been continuing to come down from its peak. And costs may be set to fall further following the latest freeze in Bank rate at 5.25%.
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According to our mortgage partner Better.co.uk, the average cost of a two-year fixed rate deal across all borrower types* is below 6% at 5.96%, according to Better.co.uk. The average cost of a three-year fix stands at 5.89%, while the average five-year fixed rate today is at 5.44%.
The average two-year tracker rate mortgage today is priced at 5.67% with the best deal of its kind priced at 5.39%.
A lender’s typical standard variable rate (SVR) is 7.73%, according to Better. This compares to around 4.78% in July last year.
As of 1 September, there were 5,338 residential mortgage deals on the market, according to data provider, Moneyfacts. This compares to 5,056 a month earlier as lenders begin to reintroduce deals as the market settles.
The number of mortgage deals had plummeted to around 2,560 following Liz Truss’ mini-Budget in 2022.
When the Bank rate rises (or falls), it has an effect on the cost of mortgages.
There are an estimated 1.4 million homeowners (according trade body, UK Finance) on variable rate deals, such as base rate trackers, who have seen almost immediate rises in their monthly repayments following every Bank rate rise.
An average tracker rate rising from 6% to 6.25% would add an extra £30 a month on a £200,000 loan taken over 25 years, for example, with monthly repayments rising from £1,289 to £1,319.
Borrowers on fixed-rate deals, where the interest rate is locked in for, say, two or five years, are sheltered from changes to the Bank rate. However, when their deal expires – as will be the case for around 800,000 mortgage holders during the remainder of 2023 and a further 1.6 million in 2024 – new deals available will be more expensive.
You can work out the monthly cost of a mortgage against various interest rates with our Mortgage Calculator.
The latest major house price indices are reporting the steepest falls in the value of UK property seen in over a decade.
Halifax’s house price report (published 7 September) showed that average house prices in August were down by 4.6% year-on-year, the biggest drop since 2009. The cost of an average UK home in August stands at £279,569, down from £285,044 the previous month, according to the lender.
Nationwide’s house price report (published 1 September) showed a similar pattern, with average prices falling by 5.3% in the 12 months to August, again the fastest decline since 2009. On a monthly basis, prices edged down by 0.8% taking average UK property prices to £259,152.
Stamp Duty cuts announced in the ill-fated mini-Budget of Autumn 2022 raised the nil-rate band on the purchase of a property from £125,000 to £250,000.
The Bank’s MPC uses interest hikes as a means of cooling the economy and taming rising inflation.
The Consumer Prices Index (CPI) measure of inflation fell to 6.7% in the 12 months to August. It marked a modest, but largely unexpected, fall from the 6.8% recorded the previous month but compares to a peak of 11.1% back in October 2022.
The Bank of England’s Governor, Andrew Bailey said today: “Inflation has fallen a lot in recent months, and we think it will continue to do so.”
However, inflation figures should still be viewed in the context of the government’s target for the Bank of England which is just 2%. Mr Bailey said: “There is no room for complacency. We need to be sure inflation returns to normal and we continue to take the decisions necessary to do just that.”
One of the main drivers behind soaring inflation has been the rising cost of energy. However, this is now coming down. Since July the energy price cap, as set by energy regulator Ofgem, has been pegged at £2,074. From 1 October, the price will fall to £1,923.
The energy price cap refers to the annual cost of energy bills for households using the average amount of gas and electricity which pays its bills by monthly direct debit.
While this is the first time since September 2022 that the cap will be below £2,000, it’s still almost 50% higher than in March of the same year when it stood at £1,277.
Keeping track of mortgage costs is challenging – especially when rates can change on a daily basis. One simple way is use our mortgage tables, powered by Better.co.uk.
To find out what deals are available at today’s rates for the kind of mortgage you’re after, you’ll need to enter your personal criteria into the table below. Here’s what to do:
Here’s a live table of the mortgage deals available today.
Mortgage deals offering the cheapest rates usually come with fees attached. You can opt to pay these upfront or add them to the loan. To factor in the cost of the fee, order your the results by ‘initial period cost’ (in the ‘sorted by’ dropdown).
Alternatively, you can order results by initial rate, lowest fee or monthly repayment – even by the lender’s ‘follow on’ rate that the deal will revert to at the end of the term.
The very cheapest are reserved for bigger deposit amounts, usually of 60% of the property value or more. And, in all cases, you will need a sufficient income and clean credit history to be accepted for a mortgage.
If you want to see what your monthly mortgage payments might look like in different scenarios while overlaid with household bills, our Mortgage Calculator will crunch the numbers.
Once issued, mortgage offers tend to be valid for six months, although some lenders honour offers for up to 12 months. If you are looking to remortgage your current home, this means you can lock in a rate today – at no cost and with no strings attached.
*Average mortgage costs can vary between sources depending on how the data is gathered. Better.co.uk’s data refers to the average cost of a fixed rate mortgage recommendation that is created and issued to applicants over the last seven days from its panel of over 100 lenders.
The data counts remortgage and purchase loans but excludes SVRs, adverse credit, self-build and shared ownership. Data is collected at the end of each business day.
Better.co.uk targets applicants with a good credit history. Lower loan-to-values (under 85%) account for a significant portion of its business which can translate into cheaper loan rates.
Its average fixed rate costs may therefore appear lower than some others quoted on the market.
I’ve been involved in personal finance and property journalism for the past 20 years, editing websites and writing for national newspapers. My objective has always been to offer no-nonsense information to readers that either saves or earns them cash.
I am the UK editor for Forbes Advisor. I have been writing about all aspects of household finance for over 30 years, aiming to provide information that will help readers make good choices with their money. The financial world can be complex and challenging, so I’m always striving to make it as accessible, manageable and rewarding as possible.