By Mark Dickety on



Following the Bank of England’s decision to unexpectedly hold interest rates at 5.25% after better-than-expected inflation figures, lenders have been given a boost of confidence. With the increasing economic certainty, many lenders, including NatWest, TSB, Nationwide and Virgin Money are becoming increasingly competitive and cutting mortgage rates. This is good news for buyers reliant on mortgages, as well as homeowners, as rates for remortgages and moves are also being reduced. The average rate of a five-year fixed rate mortgage has fallen below 6% for the first time since early July, currently priced at 5.97% (Moneyfacts). On the back of falling swap rates, the average two-year fixed is at 6.43%, a substantial reduction from 6.7% at the start of September (Moneyfacts). Five-year rates are expected to see the biggest falls, however with two-year swap rates having fallen below 5%, two-year fixed-rate mortgages should continue to reduce over the next few weeks.

Gross lending increased from £19.1bn in July to £19.7bn in August, while gross repayments showed little change at £18.9bn in August. August saw mortgage market activity drop, to 45,000 approvals, 8% lower than the previous month, although not unsurprising for the time of year. However, with the Bank Rate thought to be at or very close to its peak, activity has improved, with a greater degree of market certainty for buyers, many of whom are looking to move in before Christmas. Consumer confidence rose to –21 in September from –25 in August, its highest level since January 2022 (GfK Consumer Confidence Tracker). People are increasingly accepting current rates as the “new normal”, and going ahead with the move, with the view that if rates improve it will only make things easier down the line.

Affordability for first-time buyers (FTBs) has worsened over the last year, with average monthly payments now £1,194 per month, up from £1,048 per month a year ago (Rightmove, on a typical FTB property, five-year fixed rate, 85% Loan-to-Value mortgage). However, many are adjusting to the higher costs of borrowing with flexible deals, longer terms or higher deposits. Looking for flexibility, more people are looking at the tracker mortgage as a short-term option, with the ability to review and move to a better deal if rates come down. Longer mortgage terms are also increasingly popular, as they can bring monthly payments down or allow a higher value property to be within budget. 56% of FTBs have a mortgage of 30 years plus, compared to 33% in 2008-09 (English Housing Survey). More families are also taking longer mortgage terms. Where possible, many are putting down higher deposits to reduce mortgage costs. Many FTBs are receiving help from ‘the Bank of Mum and Dad, or even Grandma and Grandad’, with 27% reporting receiving help from family or friends (English Housing Survey).

Wanting to give people reasons to borrow, lenders are increasing flexibility and opening up on criteria. Nationwide have recently adjusted their income level to allow higher income people to qualify for Helping Hand, a scheme which allows FTBs to borrow a higher loan amount. The lender has also increased the maximum loan-to-value to 95% for self-employed borrowers.


Disclaimer: The above is for information only. Independent regulated financial advice should always be sought when considering mortgage matters.

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Mark Dickety
Mark is an experienced Mortgage and Protection Adviser who has been providing mortgage advice since 2010. He thrives on finding the right solution for each of his clients' requirements ensuring they have the best experience possible.
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