Over a third of households see mortgage rate rises on horizon

First-time buyers are the most pessimistic about mortgage rates, with 49% expecting borrowing costs to rise compared to 37% of adults overall.

Consumer group HomeOwners Alliance asked 2,000 adults about their expectations for mortgage rates over the next 12 months. A quarter believe rates will hold steady, while 16% think rates will fall. Some 22% of those surveyed said they didn’t know.

Currently, average two- and five year fixed rates sit at 5.2% and 5.11% respectively, according to Moneyfacts, with the average standard variable rate (SVR) resting at 7.6%. However, for those borrowers with the most equity, a small selection of sub-4% rates have returned to the market.

Lack of confidence in economy

Chief executive Paula Higgins said: “That more than a third of the public are bracing for further mortgage rate rises shows how fragile confidence remains.

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“Uncertainty over the economic climate and what’s coming next does nothing for consumer confidence.

“While the Bank of England weighs up its next move, millions are stuck in limbo, unsure whether to fix their mortgage now or hold out for a potential drop in rates.”

Last month, the Monetary Policy Committee (MPC) voted 8-1 to keep the base rate at 4.5%, with one member preferring to cut the base rate by 0.25%.

The committee said it kept the base rate in “restrictive territory” to “continue to squeeze out persistent inflationary pressures”.

Higgins says it is particularly worrying that those aspiring to own their first home are least optimistic about mortgage rates, with almost half expecting mortgage rates to rise.

She added: “All the doom and gloom around the economy is actually clouding what is an improving mortgage market.”