Average two-year fixed rates mortgages surpassed 6% for the first time since 2008 during October, up from just 2.25% a year ago, according to Moneyfacts.

Headline rates were still available at 5.64% at the time of writing, but lenders continue to reprice their product ranges regularly.

The Bank of England’s base rate currently sits at 2.25% and the Monetary Policy Committee is likely to execute further hikes until inflation begins to subside back towards the 2% target. Huw Pill, the Bank’s chief economist and member of the MPC, said a “significant hike” is likely at the next meeting on 3rd November. Forecasters including Capital Economics believe the base rate will peak at 4.5% during spring of 2023.

Swap rates, instruments utilised by the lenders to price mortgages, have been relatively steady since the Bank of England’s intervention in the bond market. Should swaps remain stable over the coming weeks, we’re likely to see mortgage rates fall, though potentially not for long.

That’s likely to weigh on prices and activity through both 2023 and 2024. Knight Frank expects prices in the UK to fall by 5% next year and again in 2024. That represents a total decline of almost 10% and takes house prices back to the same level as last summer.

Our advice to borrowers remains to act quickly. We know mortgage rates have further to rise, so locking in a deal up to nine months in advance could save hundreds of pounds a month in interest payments for the average borrower. In the unlikely event conditions change, any agreement can be renegotiated.

If you'd like to discuss how the current market conditions will impact your property plans, or those of a client, please contact us at info@knightfrankfinance.com