More than one in three UK households are anticipating a rise in mortgage rates over the coming year, according to a recent survey, as concerns about the broader economic outlook continue to weigh heavily on borrowers.
The research, conducted by the HomeOwners Alliance, found that first-time buyers are especially apprehensive. Nearly half of those hoping to get onto the property ladder — 49% — believe mortgage rates will increase, compared to 37% of the general adult population.
Out of the 2,000 adults surveyed, only 25% expect rates to remain unchanged, while 16% believe there may be a drop in borrowing costs. A further 22% admitted they were unsure about what might happen.
At present, the average fixed mortgage rate for two years is around 5.2%, while five-year fixes are slightly lower at 5.11%, according to data from Moneyfacts. The average standard variable rate (SVR), often applied when fixed terms expire, is currently much higher at 7.6%.
However, there is a glimmer of hope for borrowers with significant equity. A handful of lenders have started to reintroduce fixed mortgage deals with interest rates below 4%, offering some relief to a select portion of the market.
Lack of confidence in economy
Paula Higgins, Chief Executive of the HomeOwners Alliance, has voiced concern over the growing anxiety among homeowners and prospective buyers when it comes to mortgage rates. She explained that the fact more than one in three people expect mortgage costs to rise again in the next year highlights just how fragile public confidence in the housing market still is. This caution, she says, is reflective of broader economic uncertainty.
Higgins stated that the current climate of unpredictability is leaving many households in a difficult position. With inflation still a concern and interest rates showing little sign of falling in the near term, people are unsure about whether to lock into a fixed-rate mortgage now or wait in the hope that borrowing costs may reduce. This indecision is causing stress for thousands of homeowners who are approaching the end of their fixed terms or considering entering the property market for the first time.
Recent data from a survey of 2,000 adults, conducted by the HomeOwners Alliance, found that 37% expect mortgage rates to rise over the coming year. Among first-time buyers, the figure is even higher at 49%, indicating that younger and newer market entrants are particularly pessimistic about affordability and access to competitive rates.
Last month, the Bank of England’s Monetary Policy Committee (MPC) opted to keep the base interest rate at 4.5%, with eight members voting to hold steady and one voting for a 0.25% cut. The committee justified this decision by saying it was necessary to keep monetary policy in a “restrictive” stance in order to further reduce inflationary pressures, which have been persistent since the pandemic and the energy crisis.
For many, this decision has extended a period of limbo, with households and buyers alike left waiting for clearer signs of stability. As Higgins puts it, “Uncertainty over the economic climate and what’s coming next does nothing for consumer confidence.” The longer this state of flux continues, the harder it becomes for people to plan their finances with any sense of security.
What is particularly worrying, according to Higgins, is that those aspiring to get on the property ladder are feeling the pressure most. The fact that nearly half of first-time buyers are expecting mortgage rates to increase suggests a high level of unease among younger adults who are already battling against rising living costs, high deposits, and competitive housing stock.
Despite the negative sentiment, Higgins also noted a glimmer of hope. She highlighted that there have been some signs of improvement in the mortgage market, with better deals slowly starting to reappear, especially for borrowers with larger deposits. “All the doom and gloom around the economy is actually clouding what is an improving mortgage market,” she said, implying that public perception may be more pessimistic than current conditions warrant.
However, the mixed signals and uncertain outlook are making it hard for buyers to act decisively. Lenders are gradually adjusting their products, and a few sub-4% fixed-rate deals have returned to the market for those with significant equity. But until there is a consistent trend or more positive economic indicators, many are expected to remain cautious.
In the meantime, industry experts are urging policymakers and lenders to provide clearer communication and more supportive measures to restore trust and stability in the housing market. Whether that’s through more accessible products for first-time buyers or policies that encourage market movement, it’s clear that restoring confidence will be key in the months ahead.
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