Mortgage Rate Predictions in 2022

9 Must Know Expert Predictions for Mortgage Rates in 2021 & How You Can Benefit

Thinking of Buying a House and Hoping the Interest Rates Are Favourable? You're Not Alone, Many People Are on the Edge of Their Seats Wondering What'll Happen to the Economy. We're Here to Show You 2022's Mortgage Rate Forecasts.

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9 Mortgage Rate Predictions for 2022: What Does It Mean for YOU?

Predicting interest rates has become an even more intriguing topic of speculation after the worldwide pandemic.

The economy now is as unpredictable as ever, and there is speculation that there might be slight drops in 2022.

Here’s what our experts have to say:

1. Interest Rates Will Go Up

Interest rates will go up on mortgages after they reached an historic low in 2021.

This means that rates are likely to increase in 2022, according to the latest forecasts from mortgage lenders and economists.

The average rate on a 5-year fixed mortgage is forecast to rise by 0.3% this year, rising further to 1.2% next year and 2.1% in 2024.

The Bank of England’s base rate will also increase this year, but more slowly than the market consensus.

The FCA has said that it expects an average base rate of 3%, with a range between 2.5% and 4%.

This means that the cost of borrowing money will be higher as banks pass on their costs to customers.

Inflation is likely to remain low in the coming years, which could mean that borrowers face even higher repayments when they renew their loans.

However, there might be some relief for homeowners who have been struggling to pay off their mortgages.

Mortgage lenders are expected to offer lower interest rates on new deals, so borrowers may find themselves able to afford a bigger loan than before.

2. First-Time Buyers Will Have an Easier Time

First-time buyers will have an easier time as high interest rates meant that first-time buyers were met with extreme challenges in 2021, but things are looking up.

While older borrowers experienced historically low rates, things were vastly different for new homeowners.

At the start of the pandemic, 10% deposit products were pulled off the market, but 160 options returned in January 2021, far less than the 779 pre-COVID products.

However, average 2-year fixed deal rates sat at a high of 3.65%.

However, rates now continue to improve, with average rates sitting at 2.51, and may continue to drop.

Furthermore, first-time buyers with a 5% deposit can experience rates as low as 3.09, the lowest since 2011. 

Housing prices have sky-rocketed since the start of the pandemic, making it more unattainable to purchase a property.

On average, one needs to access an additional £23,000 to afford a deposit in the UK. 

3. There Will Be a Remortgaging Boom

There will be a remortgaging boom in the UK after it took a dip in 2021, with figures dropping to ÂŁ62bn.

This is as opposed to the pre-COVID £80bn in 2019. These lower figures are partially due to people moving instead of refinancing their existing mortgage. 

Our experts predict an 11% increase, setting the amount lent to ÂŁ69bn, party because of the strong housing markets in 2017 and 2020.

In 2022, these 2 and 5 year fixed mortgages will come to an end, and many could benefit from better rates.

Furthermore, interest on debts may be on the rise, which means that homeowners may want to remortgage to consolidate these other debts. 

4. Affordability Rules Could Ease

Affordability rules could ease, so it might be easier to buy a new property in 2022. It appears the Bank of England is going to propose relaxed affordability checks for banks.

They are looking to remove the rule that says potential borrowers must provide proof of affordability on any amount, showing you can afford the highest standard interest rate, plus 3%

The banks rejected another suggestion to allow lenders to increase the number of large mortgages lent to individuals who can borrow more than 4.5x their salary.

But hopefully, they comply with this potential rule as it may make it easier to qualify for a mortgage. 

In 2021, Nationwide offered a lending ratio of 5.5x to 5,0000 households only, and Habito has announced they will offer 7x to public sector workers and individuals with a salary of more than ÂŁ75,000. 

5. Borrowers Will Fix for Longer

Borrowers will fix for longer because of the previous year. Something interesting about mortgages in 2021 is that more borrowers took out plans with terms that were longer than the typical 25 years.

While this increases interest, monthly payments are significantly less. In March, Habito launched a 40-year fixed term plan with no exit fees.

If interest rates continue to rise in 2022, the industry can expect to see more borrowers opting for longer fix term plans.

6. Mortgages Will Be Going Green

Mortgages will be going green as environmental concerns continue to be a global reality. In 2021, the mortgage market was seen to also take action.

Several lenders have offered special deals for homeowners with energy-efficient properties.

These homeowners are usually required to have an A, B, or C rating on their Energy Performance Certificate (EPC). For the buy-to-let market, a minimum of a C rating is required.

We can expect to see more energy-related deals in 2022, so if you want a better mortgage deal, you may want to consider ‘going green’.

7. Now Might Be a Good Time to Refinance

Now is a good time to refinance as the refinancing share of the mortgage market dropped significantly towards the end of 2021. This is lower than it’s been since June the same year.

With interest rates on the rise in 2022, those who bought over the last few years won’t need to refinance.

However, those who bought years back may get a deal with 0.5% or 1% less interest if they refinance at the beginning of this year.

Refinancing can mean lower monthly payments, but may not mean that you’ll pay less for the overall life of the loan as you’re extending the life of your loan.

Your best bet is to speak to a financial adviser or mortgage broker for advice on refinancing.

8. Price Growth Will Slow Down

Price growth will slow down because stamp duty holiday in 2021 meant that the property market exploded, which caused housing prices to soar.

New buyer priorities and tax savings caused prices to rise by up to 10%, but are likely to drop nearer to 3% to 4% in 2022.

Therefore, 2022 is likely to be a better year for new prospective buyers.

9. Lack of Supply Means Fewer Homes Will Be Sold

Lack of supply means fewer homes will be sold because buyers can expect less choice in 2022, with fewer homes entering the market.

With the Stamp Duty holiday and the end of COVID-19 lockdown in 2021, there was a buyers boom, with nearly 200,000 properties sold in June 2021 alone.

The lack of supply will likely prevent prices from falling too low in 2022 and will keep the market steady.

What Is the Bank of England Base Rate?

The current Bank of England base rate is 0.5% after they voted for an increase in February 2022.

Interest rates hit a record low of 0.10% between March 2020 and December 2021, Rose to 0.25% in December 2021, and has now risen further.

How is the Bank of England Base Rate Set?

The Bank of England’s base rate is reviewed and set 8 times every year.

After the meeting, the minutes are released to the public at midday on the closest Thursday after the decision is made.

UK inflation rates increased to 5.5% in January 2022, up from the 5.4% that it was before.

This caused the Bank of England to increase interest rates to try to slow rising inflation.

Predictions suggest that inflation will rise to 7.25% in April.

Got Questions? Check These First

Will Mortgage Rates Go Down In 2022?

Will Interest Rates Be Low In 2022?

Will Rates Go Back Down?

Will Interest Rates Keep Dropping?

In Conclusion

Let’s say these predictions come true: property prices rising, slightly higher interest rates etc.,

this means that those who still want or need to take out a mortgage should do so as soon as possible to secure the lowest possible rates and save the most money.

The longer you wait, the more money you’ll end up losing.

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

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