As people return from their holidays and a new school year begins, there tends to be an uptick in activity in the housing market as those who want to move focus on the task in hand, aiming to get it done before the traditional slowdown around Christmas.

This autumn, consecutive interest rate rises will also be on borrowers’ minds, with many of those relying on mortgages concerned about affordability. Meanwhile, those due to remortgage may be worried about the impending payment shock, with fixed-rate mortgages now much more expensive than the deals they took out two or five years’ ago.

According to property portal Right move, the average five-year fixed-rate mortgage is now 5.72 per cent, up from 3.91 per cent a year ago, while the average two-year fix is now 6.32 per cent, up from 3.87 per cent a year ago. However, it is worth remembering that averages are just that and cheaper rates are often available, depending on your circumstances, such as loan-to-value etc.

The Bank of England has been raising bank rate in an attempt to rein in inflation, which fell to 6.8 per cent in July. However, while the headline rate has fallen sharply from October’s peak of 11.1 per cent, following a decline in energy and food prices, it is still well above the Bank’s 2 per cent target. Consumer services prices remain sticky, while core inflation was unchanged at 6.9 per cent from June and higher than many economists expected.

While inflation is slowly moving in the right direction, economists and markets still forecast that interest rates have higher to go, possibly peaking at between 5.75 per cent and six per cent by the end of this year or early 2024. As we get closer to what many expect to be peak base rate, Swap rates, which underpin the pricing of fixed-rate mortgages, have settled after a period of extreme volatility, which made it difficult for lenders when it came to pricing. Over the past month, Swaps have been broadly flat with not much movement either way, giving many lenders the confidence to reduce their fixed-rate mortgages. At the time of writing, five-year Swaps were at 4.91 per cent [as of 6 September] while two-year Swaps were 5.57 per cent. While fixes are still substantially higher than they were in autumn 2021, they are not as high as they were and if Swaps continue in this vein, further mortgage rate reductions are likely.

It is not all bad news; once bank rate peaks, if mortgage rates then moderate further, lower property prices should help improve overall housing affordability. House prices are softening in some areas but we have yet to see the big crash that some predicted, with talk of a potential ‘soft landing’ instead. House prices are now 5.3 per cent below their August 2022 peak, according to Nationwide building society, the weakest rate of growth since July 2009, as the rise in borrowing costs has dampened housing market activity. That said, the lender suggests that a ‘relatively soft landing is still achievable, providing broader economic conditions evolve in line with [forecasters’] expectations. Unemployment is predicted to remain low at below 5 per cent, with the vast majority of borrowers expected to weather the impact of higher borrowing costs, particularly as many are on fixed rates. This should mean there isn’t a flurry of forced sales, which would push property prices down further.

It can be confusing working out what to do, which is why it is worth seeking mortgage 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. Get in touch for more information.