Fixed and Floating mortgage rates fall in October

The latest data from the Bank of England reveals that the average fixed and floating interest rates on new mortgages fell significantly in October.

What they said

The average floating mortgage rate for new business 1.82%
The average fixed mortgage rate for new business 1.58%
The average overall mortgage rate for new business 1.60%

Twindig take

The month after the stamp duty holiday ended the fall in mortgage rates will bring a bit of relief to those unable to secure their home purchase before the end of the deadline. The reduction in mortgage rate will have eased affordability, slightly, but in this market, every little helps. 

The increased COVID-19 uncertainty surrounding the Omicron variant may put a stop to those falls in the short term until the scientists have had time to digest the new data and calculate the risks associated with Omicron. However, with a shortage of homes for sale as long as lenders continue to increase the market share in the mortgage market the balance of pressure on mortgage rates may remain down not up. 

We show the impact on affordability in the chart below which shows the mortgage payment based on the average UK house price assuming an 80% LTV mortgage with the average overall mortgage rate.

Mortgage payments increased as house prices rose, but the fall in mortgage rates in October more than outweighed the impact of the most recent house price rise.

The average mortgage payment in October 2021 was £873 which is £11 lower than it was in September 2021, but £76 per month higher than it was before the start of the COVID-19 pandemic.

How big were the mortgage rate falls?

The average floating mortgage rate fell by 5.2% to 1.82%
The average fixed mortgage rate fell by 11.2% to 1.58%
Overall, the average mortgage rate for new business fell by 10.6% to 1.60%