A Brief History of Average Mortgage Interest Rates


On Thursday November 2nd 2017, the Bank of England raised interest rates for the first time in more than a decade, ending the long-term period of affordability.

What is the Current Mortgage Interest Rate?

The current UK base rate is 0.5%.

The rise from 0.25% to 0.5%, although not massive, has got many wondering how this will influence mortgage interest rates and the wider financial market. The BBC has recently reported that it expects the current average mortgage interest rate to increase from 2.56% to 2.81% as a result.

So, why was the UK base rate increased? Well, the most recent consumer prices index revealed an inflation figure of 3% for September and that the cost of living has been above its 2% target for most of the year. This can be accounted for by the tumble the pound sterling took after the Brexit vote.

What Have Mortgage Interest Rates Been in the Past?

Rates have not risen in 10 years which means 8million Brits have never experienced an increase in their adult lives, despite mortgage interest rates generally reflecting that of the Bank of England base rate.

The highest the UK base rate has been in recent memory was 17% in the late 70s when rising wages and oil prices were causing a surge in inflation. However, the UK base rate was also very high in the early 90s (in comparison with today’s rates) when it averaged around 15%.

On the flip side, some of the biggest drops were in 1992 when UK interest rates fell 9% on Black Wednesday and in 2008 they dropped 5.25% due to the financial crisis.

What Does the Future Hold for the Average Mortgage Interest Rate?

Although the rise in UK base rate has been relatively recent, our financial brokers expect to see reactive increases in mortgage rate offerings from lenders over the coming weeks. Whereas, anyone who already has a tracker mortgage will likely have already seen the effects of the increase.

There are, of course, questions of if and when there could be another increase in the Bank of England base rate and mortgage interest rates as a result. The Inflation Report has revealed that we should expect rates to rise again by the end of next year, and then again in 2019.

What Does All of This Mean for You?

In short, it’s more important than ever to consult a financial expert when seeking finance. Using an experienced commercial finance broker who has up-to-date data on the latest products and fluctuations will help ensure you not only get a deal that suits your specific lending requirements, but one that is charged at a competitive rate.

If you’re looking to finance a new project or are coming to the end of your term on an existing loan, give our commercial mortgage team a call on 02920 766565 to see what we can do for you.

Article By Luke Egan

November 11th, 2017

Luke heads up our specialist property finance team where his focus is to drive our transactions valued between £100k and £5m.

Luke and his team manage enquiries from initial enquiry through to redemption. Luke also sits on the internal credit committee with Ben and Tom.

Luke joined Pure back in 2014 following a successful role in the Barclays property finance team that lasted over 8 years.

See more articles by Luke

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