Mortgage Outlook Following the Bank of England's Interest Rate Pause

Written by Sarah Coles, head of personal finance, Hargreaves Lansdown.

This interest rate pause was signposted more impressively than the entrance to a signpost symposium.

Unless something wildly unexpected happens, we've hit the top of the rate rise cycle, and the question is no longer what will happen next to rates; it’s how long we'll wait until we see cuts and what this means for mortgages.

Tracker mortgages will hold steady when rates are on hold because they move with the base rate.

Fixed-rate mortgages, meanwhile, are on their way down – and the average two-year rate has dropped below 6%.

Fixed rates are mainly driven by expectations, and right now the market is expecting Bank of England rate cuts sooner rather than later, which is feeding into cheaper deals.

We can expect more of the same in the coming months.

If your fixed rate deal is ending, you might opt for a variable rate deal in the expectation that monthly payments will hold steady for a significant period and then drop.

However, there are no guarantees. If you’re worried about uncertainty, you might opt for a fixed-rate deal.

Of course, for anyone who fixed two years ago or more, even after the falls of recent weeks, a remortgage is going to be incredibly painful because they’re likely to have fixed for less than 2%.

We’ve seen nosebleed-inducing ups and downs in the mortgage market over the past two years – with two-year fixed rate deals hitting a recent peak of 6.85% at the start of August before dropping back below 6%.

However, this is a completely different mortgage landscape to two years ago, and there’s no expectation that we’ll return to the good old days in a particular hurry.