When Will Mortgage Rates Go Down?

So far in 2023, it has been a rollercoaster ride for homeowners and those looking to get themselves onto the property ladder.

Constant worries about mortgage rates and general unaffordability have slowed the market down significantly.

This has not been good for all involved. People are not only struggling to afford a home, but lenders are struggling to obtain customers that use their interest-rate-driven products.

Is there a solution though? Thankfully yes, and it is slowly coming into play. Some lenders have recognised without a change coming from them, the market may not move at all!

A few have started to cut their rates, in some cases by close to 1%, and despite the Bank of England rate rises, house affordability is gradually becoming a bit more possible.

On average, mortgage rates remain high though, almost two years ago, in December 2021 when rates started to rise a mortgage could see a rate of just above 2%. Not even 24 months on and the same product is hitting a rate closer to 7%. It is hoped though that by the end of 2026, we approach close to the rates of pre 2021. This could see mortgage deals being offered with interest as low as 3%.

So despite the best efforts of some lenders to make homeownership more affordable, will others follow suit and will mortgage rates come down?

What are the average mortgage rates?

The average mortgage rates in the UK vary by lender and mortgage type. With a 2-year or 5-year fixed rate as the common options, it can be a gamble settling for one or the other. Could you get better value from moving onto a new product at the end of a two-year term, or will rates have risen to such high levels by then that any new offer sees you paying more? Likewise, a 5-year offer could provide stability in terms of the rates but if they fall significantly during your agreement, you end up stuck with a mortgage that sees you paying more for longer.

Your rate will also vary based on the LTV, of which we will cover more on later. Below is an example of the current average mortgage rates in the UK with data supplied by Rightmove in August 2023.

5-10% deposit

95% 2-year fixed rate 6.86%
95% 5-year fixed rate 6.11%
90% 2-year fixed rate 6.63%
90% 5-year fixed rate 6.01%



15-25% deposit

85% 2-year fixed rate 6.5%
85% 5-year fixed rate 5.92%
75% 2-year fixed rate 6.32%
75% 5-year fixed rate 5.73%


Of course, the more money you have saved and available to put towards a deposit, the lower your rate becomes. This is because your LTV naturally drops. Unsure what an LTSV is? Read on!

What is the LTV?

LTV stands for Loan to Value and represents the percentage of the property you need to borrow money for. A 95% LTV for example means that you have saved a 5% deposit and require a mortgage that covers 95% of the property value. A higher LTV requires you to borrow more cash which is riskier for the bank. As a result, they charge more in interest. The more money you have, the lower the LTV becomes and with less needing to be borrowed, the bank can offer a smaller interest rate.

How much have current UK mortgage rates changed?

To give an indication of how much rates have changed, we looked at data from The Bank of England across ten years from June 2013 to June 2023. Using the popular 2-year term, we took the figures for both fixed and variable mortgages to illustrate the changes. These figures are based on a 75% LTV.

2013 2.63% 2.91%
2014 2.6% 2.71%
2015 1.99% 1.56%
2016 1.75% 1.62%
2017 1.48% 1.42%
2018 1.74% 1.56%
2019 1.64% 1.6%
2020 1.41% 1.66%
2021 1.39 2.24%
2022 2.87% 2.54%
2023 5.79% 5.11%


Are the best mortgage rates 5-year fixed?

As we touched upon earlier, a 5-year mortgage can be a good option, especially if rates are on the way up. You then benefit from a more affordable mortgage for a longer period. However, should rates start to fall, you can find yourself trapped in a longer-term deal paying more than you would like.

Current data shows though that 5-year terms are now not only offering terms a little better than the 2-year equivalent but much better. The gap between rates on both has not been this high since 2008. If we take figures from Moneyfacts, we can see that an average 2-year fixed deal had an average rate of 6.76% compared to 6.24% found on the average 5-year term. Based on this data, 5-year mortgages are delivering better results at this time.

The only thing is if this is where interest rates peak, you are stuck with that rate for some time!

Can I get a cheaper mortgage?

It is possible to find some amazing deals if you shop around but, in most cases, these do tend to be for those already owning a home and those with a substantial deposit. However, you can make a difference by doing a few things.

Firstly, save for a deposit and make that deposit as much as you can. The larger the deposit, the smaller the mortgage needed and therefore the lower the interest rate.

Then shop for a lender, the market is competitive and can be full of surprises.

Then look at the type of mortgage, fixed, variable, 2-year, 5-year. Find one that provides you with as much long-term affordability as possible.

Before settling on a mortgage, look at the market and make an educated decision. Could holding off for six months actually save you hundreds or even thousands of pounds?

Will the mortgage rates fall in 2023?

At the start of this piece, we mentioned how some lenders have started to shave small percentages of their mortgage rates and it is expected others will follow. One thing homeowners can take solace in is that within the past month, the average rates for mortgages on both two and five-year fixed terms have fallen for consecutive weeks for the first time. Whilst those drops are small, it is a sign that we could be heading in the right direction. The Moneyfacts data also showed that over 13 weeks, both rates had risen seven times and decreased six. It is only recently though that rates have fallen week by week. The small movements are likely to remain, and it shouldn’t be expected that we see a sudden drop from rates above 6% to under 5% or less. Overall, the remainder of 2023 will see rates start to slide but it will be a slow process.

What are the current mortgage rates for first-time buyers?

First-time buyers have perhaps had the hardest ride over the past few months with the funds they felt sufficient to be able to start their property journey, often being nowhere near enough. With the associated fees and higher rates, it can become much more costly than first hoped.

Commonly, first-time buyers only have a small deposit behind them. Perhaps 5-10%. As a result, the LTV is between 90-95%, making the rates at the higher end of the scale. Which means in August 2023, you could be looking at close to 7%.

To help save money where you can, look at any fees attached to the mortgage. This could be admin fees, legal fees, early exit charges and more. Some lenders have deals that cover these fees for you. But be careful. Whilst the fees are covered, the interest rates may be higher still, meaning you actually end up paying even more.

If you find your current mortgage unaffordable and are looking to sell in order to secure a cheaper property, or you are looking to buy in a more affordable area, speak to Cairds. As Epsom estate agents, we are well-versed in all things property to ensure people can find somewhere to live that is not only affordable but of high quality too. Whether looking for property for sale in Ashtead or property to rent in Epsom, get in touch with our team. With an independent mortgage advisor on hand too, we can help you navigate the tricky world of mortgages. Contact us today and let’s make your move happen!