Bank of England issues update for anyone with a mortgage ahead of interest rate decision

Those hunting for a new deal now face monthly repayments of £1,562 on a typical two-year fixed mortgage at 5.68 per cent, based on a £250,000 loan over 25 years roughly £1,000 more annually compared to average rates in June 2025.

For those hoping rates would continue to fall this year, experts warn the outlook has become more uncertain following the conflict in the Middle East.

Karen Noye, mortgage expert at Quilter, said the figures highlight "what has been a turbulent period for the mortgage and housing market."

She added: "This likely reflects the slight easing of mortgage rates following the initial shock caused by the conflict in the Middle East."

However, she warned that pressure on household budgets is mounting.

"Higher energy costs and other inflationary pressures will weigh on people's ability to save, and when combined with elevated mortgage rates, this is likely to dampen buyer appetite and slow activity in the months ahead," Ms Noye said.

"While the Bank of England has paused for now, the outlook remains uncertain and will depend heavily on how global events feed through to inflation and energy markets."

According to the Bank of England's latest Money and Credit report, mortgage approvals for house purchases rose to 65,900 in April, up from 64,000 in March and above the previous six-month average of around 63,100.

The figures come ahead of the Bank's next interest rate decision on June 18, with the base rate currently standing at 3.75 per cent.

While demand from buyers remained resilient, overall mortgage borrowing slowed. Net mortgage borrowing fell to £4.4billion in April, down from £6.8billion in March and below the recent six-month average of £5.1billion.

Remortgaging activity was largely unchanged, with 51,263 approvals recorded in April compared with 51,247 the previous month.

There was also a slight increase in the average interest rate paid by borrowers taking out a new mortgage, which rose to 4.08 per cent from 4.03 per cent in March.

Existing homeowners saw a small improvement, with the average rate on outstanding mortgages edging down to 3.92 per cent from 3.93 per cent.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, pointed out that April's remortgaging approvals hit their highest monthly level since October 2022.

"The huge drive towards remortgage business is inevitable given many will be coming off cheap fixed rate mortgages this year," she said.

Ms Springall noted that borrowers rushing to lock in deals amid market turmoil has also fuelled activity, with rates climbing due to Middle East unrest.

She warned that hesitation could prove costly in the coming months.

"Mortgage rates have stopped rising drastically, yet there is no guarantee to expect any significant falls until future rate setting becomes clearer, so seeking advice is vital," Ms Springall added.