Mortgage rates coming DOWN again in huge sigh of relief to Britons - and interest rates are set to drop too

The Bank of England has said settling market conditions has caused mortgage rates to decrease
The Bank of England has said settling market conditions has caused mortgage rates to decrease
Joe Giddens
Georgina Cutler

By Georgina Cutler

Published: 17/01/2023

- 13:59

Updated: 14/02/2023

- 10:22

Bank of England chiefs have said that mortgage rates are coming down as interest rates are set to decrease

Mortgage rates are on their way back down, the governor of the Bank of England said last night.

Andrew Bailey, appearing before the Treasury Committee, blamed the mini-budget for chaos in the gilts market, resulting in a surge in mortgage rates.

The mini-budget was introduced during Liz Truss’ short tenure as Prime Minister, designed to stimulate economic growth through a series of tax cuts.

Governor of the Bank of England Andrew Bailey appearing before the Treasury Committee at the House of Commons, London, where he said that market conditions have returned to normal after the mini-budget sparked chaos in the gilts market, leading mortgage rates to surge. Picture date: Monday January 16, 2023.
Andrew Bailey spoke to the Treasury Committee as he blamed the mini-budget for chaos
House of Commons

Andrew Bailey told the Treasury Committee: “I hoped that we would see mortgage rates come down, and that has happened, we have seen new fixed-rate mortgage rates have come down since.

“I’m talking there about the lower-risk end of the mortgage market, so loans with a sub-75 per cent loan-to-value, and actually the higher-risk end as well.

“We have seen correcting in that respect and, of course, that benefits people seeking mortgages.”

Mr Bailey added that the “risk premium” in the UK interest rate environment has now gone – meaning the higher rates demanded in countries where there is greater economic instability.

While mortgage debt and home repossessions are much lower now than during previous financial crises.

He said: “Overall mortgage debt service levels are lower than they were than at points in history when we had stress – before the financial crisis and in the early nineties.

“However, I do recognise that one of the big distinctions between now and some of the points in the past is that we are in a cycle of rising interest rates.”

The governor also admitted that there is “something of a hangover effect” following the turbulence of late last year.

File photo dated 11/12/20 of a woman cycling past the Bank of England and the Royal Exchange in the City of London. The Bank of England is expected to push interest rates even higher next week at its latest meeting, putting further pressure on mortgages. Issue date: Sunday December 11, 2022.
Interest rates are also set to drop according to Jonathan Hall
Kirsty O'Connor

“It is going to take some time to convince people that we are back to where we were before”, he said.

Chief Executive Office of the Prudential Regulation Authority Jonathan Hall spoke to the Committee about interest rates, claiming they have stabilised.

He said: “Not only have the interest rates stabilised, depth and liquidity has returned to the market and volatility has declined.

“So from a market perspective, we are back to where we were at the end of the summer.”

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