Interest Rate Trends: Will They Decline or Keep Rising


At the moment, interest rates are rising. Because of this, a lot of people are close to losing their homes. If interest rates continue to rise, then it’s very likely that millions of people are going to default on their mortgages.

Whether you are a homeowner or just someone who’s interested in the current financial markets, it’s good to educate yourself about interest rates. Knowing about interest rate trends will help you to make better decisions.

This post will tell you about interest rate trends, addressing whether they’ll start to decline or keep rising.

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Mortgage Rates

At the moment, interest rates are high.  Unfortunately for people interested in buying their first house, this means that they are going to have to pay a lot more for their mortgage than they would’ve had to a year or two ago. In spite of high-interest rates, it is still possible to get a very good deal on one’s mortgage. If you are planning on buying a house then you need to compare rates, so that you can find a policy that’s right for you. It is also worth noting that if you plan on buying a house now it is probably good to get a two-year fixed mortgage. A two-year fixed mortgage has a fixed rate for a period of two years, then afterward, the rate becomes the same as it is at the time that the period ends. You can re-mortgage and get another fixed mortgage afterward.

Rising Rates

At the moment, it seems that interest rates are only going up. This is in part due to the economic fallout from the COVID-19 pandemic, and also Russia’s invasion of Ukraine. The invasion of Ukraine has sent gas and oil prices soaring. The conflict has also caused interruptions to global food supplies. Since everything is a lot more expensive, it should not come as a surprise to you that interest rates are rising, too. However, some analysts predict that if the conflict steadies and economies are able to recover their losses post-COVID, that interest rates could fall again.

Fixed-rate Mortgages

As mentioned earlier, you should consider two-year fixed-rate mortgages. If you are getting your first mortgage then you can get it with the interest rate fixed for two years. By getting a two-year fixed-rate mortgage you will be able to avoid the inevitable interest rate rises. Then, at the end of your period, hopefully, interest rates will have fallen and you can pay the rate at that time. You can also re-mortgage your house and get another fixed term, depending on your situation at the time.

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Purchasing Houses

Now isn’t the best time to purchase a house, to be truthful. Interest isn’t the only thing that’s rising—property prices are too. A lot of financial analysts predict that the property market is going to plummet at some point in the next few years. However, unfortunately, because property prices and interest rates are rising, so too are rental costs. Renting a house has never been more expensive than it is currently. This puts a lot of people between a rock and a hard place: they can’t afford to rent a house but don’t want to pay high-interest rates.

Rate Cuts

There is a chance that interest rates will be cut to support the economy. However, that is not expected to happen for some time. At the moment inflation is well over a target and is continuing to rise. Rising inflation means rising interest. It is possible that when inflation stabilizes, rate cuts could follow. Something else that’s worth noting is that many developed economies are currently heading for recession, including the United Kingdom. When economies are as weak as they are now, there is little chance of an interest cut coming.

Future Decline

If the economy is able to stabilize itself, and inflation is able to return to normal levels, then interest rates could decline. However, there is no obvious sign that any of those things are going to happen soon. With this in mind, you should be careful when you are taking out a mortgage and must get one that’s at least fixed for two years. Variable mortgages are too risky at the moment. In more stable economies, variable mortgages can be a good idea. Currently, though nobody is recommending them. As interest rates rise, so too will the cost of your mortgage payments.

At the moment, interest rates are rising. There is no clear sign that they will fall or be cut at any point in the near future. If you plan on buying a house, then a two-year fixed mortgage is your best option. Make sure to explore different providers and rates, and search for a good deal.

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