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Derin Clark

Derin Clark

Online Reporter
Published: 06/10/2021

The past few months have seen fixed mortgage rates fall to record lows, with lenders now offering sub-1% rates on two and five year fixed deals. For many homeowners their mortgage repayments are among their biggest monthly outgoings and with energy prices and inflation rising, if mortgage rates were to also rise it would put some households under financial pressure.

Will mortgage rates rise?

There are many factors that impact mortgage rates. The Bank of England base rate, for example, will have an impact, but competition within the market can also influence rates. For example, right now mortgage rates are at record lows, which may be unsurprising as the Bank of England base rate has remained at an all-time low of 0.1% since March 2020. However, there is speculation that the Bank of England will increase the base rate next year, possibly even in the first few months of 2022, which as a result has seen swap rates (which impact the cost of mortgage funding for banks) rise over the past few months. Normally, a rise in swap rates would result in banks increasing mortgage rates, but rates have instead fallen to record lows. This could be due to competition within the mortgage market, as lenders compete to attract new borrowers and keep existing borrowers on their books. However, the closer it gets to the possibility of base rate rising becoming a reality, the higher the likelihood of banks increasing mortgage rates.

Fortunately for homeowners, it is unlikely that if mortgage rates do rise it will be a significant increase, so there is little possibility of rates rising to 5% or more overnight. Still, with many household finances already stretched to their limits and inflation rising, many homeowners may find that even a small increase in mortgage rates will have a substantial impact on their finances.

Should you lock into a mortgage deal now?

With mortgage rates remaining at record lows homeowners coming to the end of a fixed rate deal, or who are already on their lender’s standard variable rate (SVR), may want to consider locking into a new fixed rate deal now. Homeowners* who own 40% equity in their home can currently get a two year fixed remortgage deal from as little as 0.79% or a five year fixed deal from 0.91%. Meanwhile, homeowners who own just 15% equity in their home can get a two year fixed deal from 1.53% or a five year fixed deal from 1.77%.

Compare the best remortgage rates

Visit our two and five year remortgage comparison charts to view and compare the best deals currently available to homeowners.

Although competition within the mortgage charts remains strong, mortgage lenders will likely be vigilant at the possibility of the Bank of England raising the base rate and, as a result, could increase rates at any time. Homeowners, therefore, may want to avoid delaying locking into a new fixed rate deal if they want to secure the most competitive rates.

When should you avoid locking into a new fixed mortgage deal?

Homeowners already in a fixed rate mortgage deal should be aware that if they exit their current deal to lock into a new, lower rate, exit fee charges could result in them paying more to switch than staying with their existing deal. As well as this, homeowners planning to move home in the next few years may want to avoid locking into a long term fixed deal as, again, it could result in them having to pay hefty early exit charges to leave their current deal when moving home.

Mortgage borrowers unsure of whether they should lock into a new fixed rate deal or what term to lock into may want to consider speaking to a mortgage broker who will be able to provide the best options for their circumstances. Readers of can speak to a mortgage broker for free by choosing to speak to our preferred broker Mortgage Advice Bureau.


* Some deals offering the lowest rates are only available through selected mortgage brokers or have opening restrictions.


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