James O'Brien 10am - 1pm
Hope for homeowners as average mortgage rates fall for first time in months
20 July 2023, 09:58 | Updated: 20 July 2023, 13:07
Average mortgage rates have fallen for the first time in months after a bigger than expected drop in inflation.
The average mortgage rate on a two-year fixed deal now stands at 6.79 per cent, falling from 6.81 per cent, according to Moneyfacts.
The average five-year fixed-rate deal has also dropped to 6.31 per cent from 6.33 per cent.
It is the first time mortgage rates have fallen since the spring, coming after a surprise drop in inflation.
That is a fall from 8.7% in May, using the consumer price index, a method for measuring how fast prices are going up.
While it is still far ahead of pre-pandemic and war in Ukraine levels, the rate of growth is slower than the 8.2% predicted by some forecasters.
Inflation falls back by more than forecast to 15-month low
Following the fall in inflation, the Bank of England is not expected to raise interest rates as high as previously expected.
Forecasts suggested interest rates may be raised to six per cent, but may not peak at 5.75 per cent.
This is now reflecting in mortgage rates, which may also now peak lower than expected.
In June, banks agreed there will be a minimum 12 month period before a home is repossessed.
Borrowers will also be able to make a temporary change to their mortgage terms, for example by switching to an interest-only deal, then will be able to return to their original deal within six months without impacting their credit scores.
The three measures:
- Speaking to your bank if you are struggling has no impact on credit score
- Change to interest only or extend mortgage term - for six months no questions asked
- Minimum 12-month period before repossessions can occur