Sub-5% rates return to the UK mortgage market

UK mortgage market update – November 2023

Written in line with our editorial policy.

Following mortgage rates peaking over the summer, November brought some welcome news for borrowers as sub-5 per cent rates made a return to the market. 

Thanks to inflation continuing to fall and the base rate being kept at 5.25% by the Bank of England, lenders have cut rates again.

It means borrowers are seeing an increase in the number of two-year fixes at less than 5%. According to MoneyFacts, there are now 27 lenders offering sub-5% mortgages on two to ten year fixes, compared to 13 lenders at the start of October. 

For the almost 1.4 million homeowners with mortgage deals coming to end in 2024, the news may provide some relief. However, there is still concern that many people will still face increases in their mortgage payments.

A worrying time for mortgage borrowers

Mortgage rates have soared since the end of 2021 when the Bank of England began to increase the base rate. At that time, an average two-year fixed mortgage was just 2.34%. 

Whilst rates have been coming down in recent months, the same two-year fixed product now has an average rate of 6.13%. 

In July the Bank of England revealed that two million people are set to pay between £200 and £499 more per month by the end of 2026 due to higher rates on their remortgage deals. 

A further one million borrowers face an extra £500 per month, which could be completely unaffordable for many homeowners.

How much does a typical mortgage cost today?

Latest Land Registry data reveals that the average home in the UK is currently worth £291,385. According to MoneyFacts, someone with a house of that value looking to borrow £170,000 could potentially achieve a best rate of 4.79% on a two-year fixed deal and monthly payments of £973.11. For a five-year fix the rate drops to 4.43% with monthly payments of £938.17.

For older homeowners with smaller outstanding mortgages, the monthly repayments are not so high. Someone living in a typical home worth £291,385 with a £60,000 mortgage could potentially achieve a best rate of 4.79%. The monthly payments would be £343.45 per month on a two-year fixed deal. For a fix-year fix, the rate drops to 4.43% with monthly payments of £331.12.

*Based on the UK’s average house price of £291,385. Figures correct at time of writing (Nov 2023).

Could you clear your mortgage with equity release?

In addition to the UK’s mortgage market, the equity release market has also seen lenders cut rates in November. 

Lifetime mortgages, together with retirement interest-only mortgages (RIOs) have become popular lending options for homeowners age 55+ making monthly mortgage payments in later life. 

It’s great news for older homeowners worried about how they will cope with hikes to their mortgage payments. An equity release plan can offer a much-needed lifeline – and may even prevent those in financial difficulties from losing their home.

Over-55s can use equity release to finally clear their standard or interest-only mortgages, without any mandatory monthly repayments to make on their loan. Instead, the interest can be left to roll up each month on the loan until all homeowners on the plan pass away or move into long-term care.

<< Discover how much money you could unlock from your home with our free online equity release calculator >>

Of course, equity release is typically a lifetime commitment, so it’s important you take the time to make the right decision and seek specialist advice. It’s also important to gather quotes from different providers to ensure you’re getting a competitive deal. 

Call our friendly team today on 0808 178 3055. Or request a free callback here for a time that is convenient for you.

Think carefully before securing other debts against your home.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn