Interest rates have been falling in recent months after a turbulent year which saw almost all rates below 5% disappear from the market. The UK government's disastrous mini-budget in September wreaked havoc on the financial markets, with more than 40% of all mortgage products pulled overnight after then-chancellor Kwasi Kwarteng's mini-budget triggered a slump in the pound and fears of further interest rate hikes.
In October, the average two-year fixed mortgage rate was close to 6% with a typical two-year fixed deal 5.75%, up from 4.74% on the day of the mini-Budget. Rates slowly began to fall in November and have continued to go down after Rishi Sunak replaced Liz Truss and increased economic stability.
According to MoneySavingExpert, re-mortgagers can currently find deals with interest rates as low as 4.56% on two-year fixes and 4.38% on five-year fixes. If you're considering locking in for ten years, things are even better. Halifax has a ten-year fix at 4.04% and Lloyds Bank has one at 3.99%, though this is limited to borrowers with an existing Lloyds current account. To get all the latest money-saving news straight to your inbox twice a week sign up here.
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However, it is not as straightforward as simply looking at interest rates - whether a mortgage is actually a good deal also depends on other factors such as if there are fees involved and economic projections.
Ian Rogers, company owner at south-Wales based C A Mortgage Services Ltd, told WalesOnline that the outlook had improved since Ms Truss' mini-budget which temporarily saw fixed rates stuck at around 6% or higher. "To be honest, this is traditionally a quiet period of the year for the industry, especially with purchases," he said. "You won't see that many between December and March. We still deal with them, with first and second-time buyers but not as many.
"The problem with first-time buyers is affordability, which needs to be really assessed vigorously. Purchasing is quiet which is normal, but what we are coming across is a lot of people coming off low fixed mortgages and their mortgages are going up by as much as £300 a month in some cases due to the interest rates."
Ian said fixed rates were currently somewhere between 4.5% and 5% and that buyers might get slightly lower if they were willing to pay a fee. But he said his company recommended against doing this as customers have to pay interest on that fee too.
"We are seeing a lot of people starting to struggle with debt and things like that," he admitted. "People are loading up credit cards just to survive, which is a bit scary, because it's going to go pear-shaped eventually. People are cutting their cloth accordingly but you can only take that so far. You hear about people not using their heating and things like that."
Ian added that he predicted inflation would fall in 2023 - something the Bank of England also forecast back in November, although it will not fall to below its 2% target until at least 2024 - but said this depended on factors such as the Ukraine war and gas supplies.
"The war in Europe, if that was resolved things may start to get a little bit better. If the bigger countries in Europe, the likes of Germany, run out of gas that would be a disaster. Even with the last rise in the base [interest] rate, lenders didn't put their rates up because they were able to find the money on the stock markets much cheaper.
"Personally I think interest rates will level out by the early summer. By the back end of this year they will start to come down as inflation comes down. The other marker is if the price of the pound goes up against the price of the dollar then fuel becomes cheaper again.
"In a nutshell, [it's about] people being able to afford a mortgage, people having enough deposit to put down on the mortgage. There are very few 5% deposits at the moment so 10% is basically the benchmark."
For those who are on a fixed-rate mortgage which is due to end soon, MoneySavingExpert says the most important thing is to avoid falling onto your lender's standard variable rate (the rate you revert to when your current deal ends). Some lenders' standard variable rates have risen to over 7% recently, far higher than the most competitive fixed and variable deals.
If you fix now you will have to pay a hefty fee to leave the deal early, but you will have certainty of what you'll be paying for the duration of the deal. If you don't want to fix, another option is to get a tracker mortgage. Tracker rates are as low as 3.74% now, though variable deals are risky as your interest rate will rise if the Bank of England hikes the base rate.
Ian said: "If someone's attitude to risk is adventurous, I would say to take a tracker mortgage as if interest rates go down then that will help you. Of course, if they go up that will have an impact.
"For people who are risk averse I would suggest a two-year fix which is slightly more expensive than a five-year fix, which tells me the banks think rates will go down. I would advise people to contact a local brokerage, have a look at their reviews and decide which one to go with. We would recommend people contact us about three to four months before their deal ends."
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