What’s Next for UK Mortgage Rates in 2022?

If you have spent the past couple of years cutting back on unnecessary expenses and envisioning taking your first step onto the property ladder, you may be wondering what to expect from mortgage rates in 2022. It can be impossible to know where to begin and the process of applying for a mortgage can be a minefield for a first-time buyer but by familiarising yourself with the following information, you can find out everything you need to know about mortgage rates in 2022 and proceed with a basic knowledge and understanding of what to expect when you eventually submit your long-awaited mortgage application this year.

Interest rates will rise

In 2021, the average 30-year and 15-year interest rates dipped. In 2022, however, they are expected to rise. It has been widely reported, for example, that the base rate will only experience a slight budge for monthly payments for variable rate mortgages whilst fixed rate mortgages should remain protected until the fixed period eventually comes to an end. It has also been predicted that this could prompt a number of additional base rate rises in the coming year as the country struggles to financially recover from the pandemic-related impact on the real estate market during the past couple of years as well as mounting inflation. This has been predicted to move to 0.50% in 2022 with any further forecasts difficult to accurately predict so early in the year.

The market will improve for first-time buyers

In 2021, first-time buyers looking to take their first step onto the property ladder were faced with a number of problems as mortgage lenders remained hesitant to provide 10% deposits again. This stemmed from a decision taken in early 2020 to pull 10% deposits for an undisclosed period of time. In September 2020, for example, only 40 deals were available for first-time buyers looking to purchase a property with a 10% deposit compared to 779 during pre-pandemic times. If that wasn’t enough, they were also forced to sit back and watch as rates rose to eye-wateringly high levels whilst the cost of borrowing for existing homeowners sank to record lows. In the coming months, however, mortgage rates in 2022 are expected to return to some sense of normalcy with the average rate on a two-year fix with a 10% deposit 2.51% compared to 3.79% in December 2020.

The country will experience a remortgaging boom

It is no secret that remortgaging took a tumble in 2021 due to homeowners opting to relocate as opposed to refinance their existing property. In 2022, however, the country is expected to experience a remortgaging boom at an average increase of around 11%. This is largely due to the fact that the real estate market in both 2017 and 2020 was relatively strong and that, as a result, homeowners will be edging closer towards the end of their two and five-year fixes with the vast majority more than likely able to benefit from better rates compared to their current rates. In addition, this will also be driven by a surge in homeowners repaying or consolidating debts which is also expected to rise this year. If you have your sights set on remortgaging this year, you will be pleased to know that mortgage rates in 2022 should allow you to do so as a growing number of homeowners scramble to end the year in greater financial shape than what they entered the year with. 

There will be greater focus on sustainability

In what has been something of a global trend as of lately, mortgage rates in 2022 will be the latest to be impacted by sustainability as the environment continues to climb the ranks and fly to the top of the political agenda. In 2021, for example, a number of mortgage lenders provided specialised mortgages that gave homeowners that could prove their homes were energy efficient the opportunity to benefit from a number of special perks. It comes as mortgage lenders have recently been placed under greater scrutiny from the government to improve the energy efficiency of their existing mortgage portfolio with the buy-to-let market predicted to experience the greatest change this year with landlords now required by law to achieve an EPC rating of C on tenancies by 2025.

In 2021, mortgage rates in the UK continued to suffer from the substantial impact of the ongoing global pandemic on the real estate market. In 2022, however, it has been predicted that interest rates will rise, the market will improve for first-time buyers, the country will experience a remortgaging boom, and there will be greater focus on sustainability.

If you are planning to submit a mortgage application for the first time this year or are just looking for expert advice and guidance before you do, get in touch with GPD Mortgage Solutions to discuss your options today!