Relief for millions of homeowners as mortgage rates set to fall


RELIEF is in store for homeowners in Aberdeen, with mortgage rates now beginning to fall, after the Bank of England held interest rates at 5.25%.

NatWest, Nationwide and TSB cut the price of mortgages last night amid mounting optimism that rates have peaked. 

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Other lenders are expected to follow, with brokers predicting more fixed-rate deals at less than 5%, helping 700,000 homeowners whose deals are expected to come to an end in the next six months and a further 1.3 million on variable rates.

The decision to hold interest rates ends a run of 14 successive increases. 

Officials on the Bank’s nine-member monetary policy committee were split, with five voting against a rise and four for. 

It came a day after official data revealed a surprise fall in inflation last month to 6.7%, when it had been expected to rise on a one-off basis because of increases in food costs and the price of petrol. 

Andrew Bailey, the governor of the Bank, said real incomes adjusted for inflation are now rising. 

“This has been a big shock, a very welcome shock, to people’s incomes,” he told the radio station LBC.

The Times says average mortgage rates peaked at a 15-year high of over 6.8% in July because of fears that the Bank rate would need to rise to over 6% to bring down inflation.

However, swap rates — the expectations of future rates, used to set fixed mortgages — have tumbled. 

The two-year swap rate has fallen from 5.7% on August 21 to 5.08% on Thursday. This will feed through into cheaper mortgage deals over the next two to four weeks.

Despite this, those whose fixed deals end in the next six months still face a large rise in repayments, often coming off rates of 2.5% or less.

Andrew Montlake, from the mortgage broker Coreco, said: “It now looks like we are at the very top of the interest rate cycle, with lenders having more space to engage in a rate war . . . we will see more deals available starting with a four rather than a five, but this will be a slow and steady fall rather than anything dramatic.”

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