One of the biggest issues for borrowers in recent months has been affordability, with consecutive interest rate rises making it increasingly difficult to get the mortgage they need and making it hard to budget for rising monthly payments. News that the Bank of England voted by a majority of six to three at its November meeting to keep rates at 5.25 per cent, was extremely welcome, raising expectations that rates may have peaked.

While this development is boosting stability and confidence in the market, it may still be too early to think about rate reductions. In the minutes accompanying the decision, the Bank referred to rates remaining around 5.25 per cent until the third quarter of next year before declining gradually to 4.25 per cent by the end of 2026. Part of the reason for this is that while there has been a welcome fall in CPI inflation to 4.6 per cent, inflationary pressures remain high. While Prime Minister Rishi Sunak has achieved his goal of halving inflation before the end of this year, it is still rather higher than the Bank’s 2 per cent target.

The housing market is proving to be remarkably resilient, with prices rising for the first time in six months in October, according to the Halifax, an uptick of 1.1 per cent, on the back of a lack of homes for sale. Nationwide building society concurred with these findings, reporting a surprise 0.9 per cent rise in house prices last month, although the lender also reported that activity levels remain weak. The shortage of stock comes as no surprise as this does not tend to be a popular time of year for putting your house on the market, with many sellers preferring to wait until better weather in the spring.

Pull-out box: House prices

Lender             Monthly change (Oct)            Annual change           Average house price

Halifax             1.1%                                        -3.2%                           £281,974

Nationwide     0.9%                                        -3.3%                           £259,423

While house prices are holding firm, mortgage rates are falling on the back of declining Swap rates, which underpin the pricing of fixed-rate mortgages. Swaps continue their gentle decline, with five-year money at 4.13 per cent, down from 4.59 per cent a month ago. Meanwhile, two-year Swaps have dipped below the psychologically significant 5 per cent barrier from this time last month, falling to 4.7 per cent. Lenders have responded accordingly, with five-year fixes now available from around 4.43 per cent, which is better than we have seen for a while. Two-year fixes and base-rate trackers also remain popular for those borrowers who think rates will come down further in the short term and don’t want to be tied into a higher rate should that happen.

SONIA swaps

Current 20 Nov 2023 23 Oct 2023 21 Nov 2022
1 Year 5.086% 5.045% 5.259% 4.188%
2 Year 4.701% 4.646% 5.014% 4.243%
3 Year 4.436% 4.380% 4.825% 4.108%
5 Year 4.127% 4.088% 4.594% 3.814%
7 Year 3.979% 3.957% 4.468% 3.556%
10 Year 3.916% 3.911% 4.415% 3.339%
15 Year 3.923% 3.927% 4.418% 3.195%
30 Year 3.818% 3.831% 4.311% 2.892%

As of 22 November 2023

Source: Chatham Financial

If you are unsure as to what mortgage to opt for, it is worth seeking advice from a whole-of-market broker such as AWS Private Finance. We will advise as to the best mortgage for your circumstances, whether you are buying a new home or investment property or remortgaging. Rates can be booked up to six months before you need them, giving you peace of mind, but you can always switch to a cheaper deal when you come to take out the product if rates have fallen in the meantime. Get in touch for more information.