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Mortgage rates still higher than a year ago, but is a cut on the way?

Mortgage rates still higher than a year ago, but is a cut on the way?
Christina Hoghton
Written By:
Christina Hoghton
Posted:
24/05/2024
Updated:
24/05/2024

First-time buyers pay around £60 per month more on their mortgage than a year ago, according to Rightmove.

The property portal said the average monthly mortgage payment on a typical first-time buyer property when taking out an average five-year fixed 85% mortgage is now £1,136 per month, up from £1,076 per month a year ago.

That’s because rates are still higher now than 12 months ago.

Rate rises

The average five-year fixed mortgage rate is now 5.05%, up from 4.59% a year ago, said Rightmove.

The average two-year fixed mortgage rate is now 5.44%, up from 4.92% from 12 months ago.

In fact, rates are higher across the board. When you break down the cost of mortgages based on average deposit sizes, a mortgage costs more at every loan-to-value (LTV) tier.

For example, the average 85% LTV five-year fixed mortgage rate is now 5.03%, up from 4.56% a year ago.

For borrowers with a larger 40% deposit, the average 60% LTV five-year fixed mortgage rate is now 4.49%, up from 4.28% a year ago.

For borrowers with the smallest 5% deposit, two-year fixed mortgages are now 6.1% compared to 5.6% a year ago.

Five-year fixes up to 95% of the property’s value are now 5.7% compared to 5.15% 12 months ago.

Rate cut on the cards?

But there is some hope that rates will be cut into the summer, as inflation falls closer to the Bank of England’s target.

The Consumer Prices Index (CPI) has fallen to 2.3%, inching ever nearer to the Bank of England’s 2% inflation target, after reaching 11% in the autumn of 2022.

Matt Smith, Rightmove’s mortgage expert, said: “There’s been some to-ing and fro-ing over whether we’ll see a summer base rate cut, but [this week’s] news will likely reinforce some of the positive words coming from the Bank of England in recent days.

“Mortgage rates are still higher than this time last year, but hopefully this is the first domino to fall as we head towards lower mortgage rates in the second half of the year.”