However, our analysis shows the biggest falls actually took place last month, before the base rate was cut – and some first-time buyers with small deposits are barely seeing rates fall at all.
Read on to find out what's happening to mortgage rates for home buyers and people remortgaging, and for answers to a range of common mortgage questions.
What's happened to mortgage rates since the base rate cut?
fallen by just 0.03 percentage pointsThis doesn't mean the cut has been a damp squib, however. In reality, lenders were reducing their rates throughout July as borrowing costs dropped in anticipation of the predicted base rate change.
As the table below shows, the average two-year fix has fallen by 0.21 percentage points since 1 July, while the average five-year deal has dropped by 0.17 percentage points.
Find out more:What about trackers and variable-rate mortgages?
Since last week's cut, just 16 out of 71 lenders have reduced their SVRs, according to Moneyfacts.
SVRs vary significantly. Currently, Stafford Building Society has the lowest at 6.2%, while Aldermore has the highest at a punchy 9.73%.
Being on your lender's SVR is rarely a good idea, as you'll almost certainly be paying more than you would on a fixed-rate deal. Unless you're moving house soon and don't want to get locked in, or you only have a very small mortgage left to pay off, it could be worth remortgaging to a better deal.
Find out more:Are rates improving for first-time buyers?
Despite facing the highest interest rates, buyers with small deposits have seen the smallest reductions since the start of July.
The interactive chart below shows how much the cheapest available two-year and five-year fixed-rate deal at different LTVs has gone down by since the start of July.
Chart: reductions in cheapest mortgage rates
Your mortgage questions answered
Understanding your mortgage options and applying for a home loan can be complicated, but we're here to help.
Read on for answers to some of the most commonly asked questions about mortgages.
1. Should I get a fixed-rate or tracker mortgage?
Most borrowers take out a fixed-rate mortgage, which keeps their interest rate and repayments the same for a set number of years.
However, the drop in the base rate may make tracker deals (which rise or fall in line with the base rate) more attractive.
We asked David Hollingworth of L&C Mortgages whether trackers are worth considering. He said: 'Tracker rates still carry a higher interest rate than fixed-rate deals. However, any further cuts in base rate will narrow that gap, and over time we could see more borrowers ready to take a punt on where rates could be headed.’
David says borrowers who want the flexibility to monitor the market could consider a tracker with no early repayment charges in the short term, then lock in a fixed-rate deal if and when rates fall further.
Find out more:2. How long should I fix for... and why are five-year deals cheaper?
Five-year fixes are currently cheaper than two-year deals. This is because there's an expectation that mortgage rates will most likely fall in the short term.
With this in mind, lenders are looking to entice borrowers to lock in for longer by offering cheaper rates on five-year deals.
The best choice for you will come down to your own circumstances. A two-year fix will allow you to shop around for a new deal sooner, and give you a little more flexibility if you think you might want to move home in the next few years.
Find out more:
3. I'm due to remortgage soon, when should I start looking?
If you're in the last six months of your current fixed term you can start looking for a new deal now, as most mortgage offers are valid for up to six months.
David Hollingworth says: 'You should start to shop around a good three or four months before your deal is due to end.
'That will give you plenty of time to secure a rate and get the offer in place as well as the basic legal work that is required to put a new remortgage in place.’
Find out more:4. Can I change my mind if rates go down?
Many people use a mortgage broker when applying for a home loan, and doing so can be particularly helpful when the future of interest rates is unclear.
As mentioned earlier, you can lock in a deal up to six months before your current one expires.
If you use a broker, they'll continue to monitor the market after finding you a new deal, so if rates drop significantly they can switch you across to a cheaper option.
5. What additional charges do I need to consider?
We've focused a lot on rates, but when comparing mortgages it's also important to look at the fees attached.
It's fairly common for deals with market-leading rates to come with fees in excess of £1,000 – which can sometimes make the deal pricier overall than one with a higher rate.
Whether you're better off paying a higher rate for a fee-free deal will depend on your own circumstances. A broker will be able to help you weigh up the pros and cons.
It's also worth looking at what incentives are included in mortgage deals. Some include free valuation fees or legal work, while others offer cashback.
6. How far will mortgage rates drop?
This is the big question, and nobody really knows the answer.
The Bank of England has warned that the base rate won't be reduced again 'too quickly', but there are still hopes that further cuts will happen soon.
There's also the possibility of rates coming down if the property market frees up and competition increases between lenders.
David Hollingworth says: 'The expectation at the moment is that there's likely to be another base rate cut by the end of the year and further easing next year.
'In the short term, I expect we will see more lenders breaking through the 4% barrier for five-year fixes soon, and rates on two-year deals could improve too.'
Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative (FRN 610689) of the following:
1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance, who are authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd.
2. LifeSearch Partners Limited (FRN656479), for the introduction of Pure Protection Contracts and Private Health Insurance, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts and Private Health Insurance Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386.
3. HUB Financial Solutions, for the introduction of equity release advice, who are authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide advice and guidance on financial products for those who have retired or are approaching retirement (FCA Firm Reference Number: 455713). HUB Financial Solutions is registered in England and Wales to Enterprise House, Bancroft Road, Reigate, Surrey RH12 7RP, company number 05125701.
4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.
Other financial services:
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
We do not make, nor do we seek to make, any recommendations or personalised advice on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners.
If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer. Please note that a link alone does not constitute an endorsement by Which?.
source https://www.which.co.uk/news/article/have-mortgages-become-cheaper-since-the-base-rate-cut-aQ2hR5C3lCyU