Mortgage warning as thousands of homeowners ‘won’t benefit at all’ from interest rate reduction
Many homeowners “won’t benefit at all” from the latest round of mortgage rate reductions, according to experts.
High street lenders, including Halifax and NatWest, have been slashing interest rates.
However, many customers on a fixed rate mortgage are unlikely to see much difference in their repayments if they started or negotiated their deal within the last year.
Those on a fixed rate mortgage have a set interest rate attached to repayments over a negotiated period of time, usually between two to five years.
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Some homeowners will not see any benefit from mortgage rates dropping
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Britons have been forced to contend with rising interest rates over the past year and a half due to the Bank of England raising the base rate to ease inflation.
While this has been beneficial to savers, it has pushed up the cost of mortgage repayments for millions of households.
With inflation easing, the central bank has paused its series of rate hikes with many analysts forecasting cuts later in the year.
This will likely “benefit” homeowners coming to an end to their fix and new homebuyers but those in the midst of their deal are expected to lose out.
Nathan Reilly, the director at mortgage technology firm Twenty7tec, spoke to GB News about what homeowners and buyers alike should expect from the property market in the months ahead.
He explained: “Everything from the market and wider economic sphere suggests that unless we witness another black swan event, we will be in a decreasing rate environment consistently over the medium term.
“The recent decreases have been driven by a decrease in SWAPs over Christmas and the need from lenders to put a bit of impetus in the market, alongside pre-empting the movements from their peers because it’s once again fiercely competitive after a subdued 2023.”
The mortgage expert emphasised fixed rate customers in the middle of their deal are likely to be the biggest losers of this period of rate cuts.
The Bank of England has held the base rate at 5.25 per cent PA
Mr Reilly added: “Almost everyone will benefit from a decreasing rate environment, particularly those that have been hamstrung by affordability, such as first time buyers and movers, but it will be those where their current rate is coming up for review that will benefit most.
“Unfortunately, those that have locked in on two-year fixed rates will have a tough decision to make and may have to suffer the pain of being stuck until next year, whilst those that opted for a five fixed year last year won’t really benefit at all in the short to medium term.”
The average two-year fixed residential mortgage rate is 5.81 per cent, as of January 8, 2024, according to Moneyfactscompare.co.uk.
The money comparison website said the average five-year residential mortgage rate was 5.42 per cent.
