Mortgage rates close to peaking, says Zoopla

The cost of mortgage rates are close to their peak and are likely to fall rather than rise, according to property group Zoopla.

This is because there is a cooling in market expectations for base rate rises, despite the Bank of England making another increase to bring the underlying rate to 5.25% yesterday.

Zoopla said: “This cooling in market expectations for base rates has led to a fall in the underlying cost of finance for fixed-rate mortgages.

“Some banks have already started to reduce mortgage rates as a result. These are modest reductions so far, but a sign mortgage rates are peaking.

“We expect mortgage rates to fall further in the months ahead but how much depends on the outlook for inflation and what this means for City expectations for base rates. We could well see sub 5% mortgage rates return this autumn.”

The Mortgage Works currently has a 2-year fixed rate buy-to-let mortgage at 4.99%, but it comes with a 3% fee and requires a hefty deposit of at least 45%.

Other low rates also contain high fees, like LendInvest’s 2-year fix at 4.54% but with a 7% fee.

Richard Donnell, executive director of Research at Zoopla, said: “It’s not all doom and gloom for the housing market. There are signs that mortgage rates are peaking and 87% of mortgages are on fixed rates.

“For homeowners and would-be buyers who are impacted by mortgage rates, it’s important to note that the impact is not uniform across the UK. Higher mortgage rates hit harder in higher value markets in Southern England where a larger deposit and income are required to buy with a mortgage.

“In contrast, in the north of England and Scotland, house prices are still rising as the impact of higher mortgage rates is less pronounced. In certain areas in these regions, it’s also still cheaper to buy than rent at 5.5% mortgage rates.”