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The great mortgage conundrum
UK base rates are UP to 4%, so trackers are rising, yet new mortgage fix rates are DOWN

What you need to know NOW about mortgage rates

The mortgage market has turned upside down over the last year. Almost everyone whose mortgage deal ends will pay very substantially more. Yet in the last few months there's been a more subtle change. To explain, below we've Martin's state of the mortgage nation, then our step-by-step how to get your cheapest mortgage deal.

This graph tells a powerful story. While four months ago the cheapest tracker mortgages weren't that much more than half the cost of the cheapest fixes, now things are approaching parity...

Understanding why these rates are moving in different directions is crucial to helping you decide your best course of action...

• Variable mortgages are HIGHER due to UK base rate rise. If you're on a standard variable rate (SVR), a discount rate, or a tracker, your rate usually moves in the same direction as the Bank of England base rate.
  
  This has just been increased from 3.5% to 4%, adding roughly £25/mth per £100,000 of mortgage to repayments. It's the 10th consecutive rise, taken all together they've added roughly £200/mth per £100,000 mortgage.
  
  - How much'll your rate rise & when? Lender-by-lender changes
  - How much will you pay mortgage calculator
  - Compare the cheapest new tracker deals
  
  
• Fixed rates are LOWER as they look over the longer term. Of course, fixed rates don't change while you've got them, so what I'm talking about here is the rate new fixed deals are set at (see cheapest fixed-rate comparison).
  
  These are mainly impacted by things called gilt yields and swap rates - which look at the market's longer-term interest rate predictions. These rocketed after September's mini-budget disaster, but have been decreasing since. In October, the cheapest 2yr fix was around 5.6%, now it's 4.3%.
  
  You may have also noted we have an 'inverted yield curve' (even if you don't know what that means) - where the longer you fix, the cheaper it is, as the long-term interest rate environment is seen to be lower. So the cheapest current fixes are for 5 and 10 years at 4%. (See 10-year fixes pros & cons).

The big questions - have UK rates peaked? Should you fix?

Personally, I can only confirm with certainty UK base rates will either go up, down or stay the same. Other than that, no guarantees. Though the markets now predict they'll top out at 4% to 4.5%. If that's correct, the peak is near. After peaking, it's suggested they'll hold for the rest of the year and may drip down a little in 2024.

As for fixed-rate mortgages, brokers we've spoken to consider they could squeeze a little more below 4% soon - see will fixes get cheaper? So currently, you needn't pay much premium for fixing - and, unlike a few months ago, many whose current fixes are ending can lock in again for far less than the SVR they'd jump to if they did nothing.

Ultimately with fixing though, as externalities are hard to predict, focus on your own finances. The less room you have for rate rises and the more you value budgeting certainty, the more you should bias towards fixing and fixing longer. See our full fixed vs tracker analysis.

'I'll wait until base rates drop down to what they were'

I've heard this a good few times, and it worries me. Of course for anyone under 35, it's hard to remember that sub-2% rates we've got used to since 2008 are, historically, an anomaly - in fact, it'd never been that low in the prior 300 years.

So don't assume rates will 'go back to normal', as that wasn't normal. I'm not saying it won't happen, just that there's no rule it has to.

Under six months until your current deal ends?

These days, some lenders let their existing mortgage customers, who have deals that are coming to an end, lock in a new rate three to six months in advance. For newer customers, it's usually up to 3mths.

This can sometimes be done without any fees. In that case, you can bag a deal now as, if you like, an insurance policy against rate rises. And if rates do drop, you're usually (do check) able to ditch the 'insurance rate' without penalty, so can bag something cheaper. See our bag early mortgage deal help for more details.

Now over to the team for the practicals...

If you're nearing the end of your mortgage deal, it's best to download our free 62-page PDF Remortgage guide. This has full info on what a remortgage is and how it works (also see the First-time buyers' mortgage guide). In brief...

1. Gather details of your current mortgage. Collect the following information, as it'll help when searching for a new deal:

- What's the rate? Plus monthly payments & outstanding debt.
- What type is it? Fix, tracker or standard variable rate? See fixes vs variables.
- When's the intro deal over? For example, when does your fix end?
- When must it all be repaid? In 10, 20 or 25 years?
- Will you be penalised to switch deals? Does your fix or tracker have an early repayment charge? If so, it'll likely be tough to find a rate right now that makes it worth paying the charge, but you might consider it if securing today's rate is important to you.
- What's the loan-to-value (LTV)? This is the proportion of the home's current value you borrow - for example, a £280,000 mortgage on a home worth £350,000 is 80% LTV. Rates get cheaper the lower your LTV. See LTV help.

2. Check what your existing lender can offer (this can work out for many). Start by checking what 'product transfers' your existing lender is offering as a benchmark. In recent months, many providers have been offering lower rates to existing customers than new, something that - while not as pronounced as before - typically remains the case. Plus, your existing lender is allowed to forgo affordability checks if you're not borrowing more - a boon if you'll struggle to get accepted with a new lender. Product transfers can also involve less paperwork and fewer fees.

3. Do a comparison to speedily see the market's best deals. Yes, fixed rates are a far cry from where they were a year ago, but they're still significantly cheaper than a couple of months ago. They're also much better for most than staying on your lender's standard variable rate (SVR). Use our mortgage comparison tool to find the rates currently available.

It's also worth noting that five- and 10-year fixed deals look good value right now, because the current interest rate situation is seen more as a short- to medium-term thing. So if you fancy a longer fix (in most cases, that means you're pretty sure you won't move in that time), it's something to discuss with your broker (more on this later).

4. Use our calculators to compare the best deals. To simplify the process, plug your numbers in here...

- Basic mortgage calculator
- Compare two mortgages
- Compare fixed-rate mortgages

5. Actually getting accepted for a mortgage is tough right now. There are two big factors that dictate whether you'll be accepted for a mortgage...

• Affordability check. Lenders carry out strict checks to see if you can afford mortgage repayments on top of your other expenses. For most people, living expenses are going up, meaning acceptance can be harder.
  
  But new lenders don't just assess if you can afford to repay at current rates... they also 'stress test' how you'd cope if interest rates went up further, meaning you'll need to have extra leeway in your finances. So it's best to consider being more frugal in the run-up to a mortgage application. For full info on what you can do to ease acceptance, see 17 ways to boost mortgage chances.
  
  
• Credit check. A poor credit history can torpedo a remortgage application. So check your credit file (for free) to ensure there are no errors, then minimise other credit applications, and pay down debts if you can. See 36 tips to boost your creditworthiness.

Yet even if you've done everything right with your credit report and minimised outgoings, know that lenders' acceptance criteria differ from one to the next, meaning not everywhere will accept you. So...

6. ... Most should use a mortgage broker. On top of guidance for those who find sorting a mortgage tough, they have details of most lenders' acceptance criteria (not usually publicly available), which they can use to place your application with a lender more likely to accept you. Plus there are sometimes top deals, and even some product transfers, that can only be accessed through brokers. Which is why our view is that most people should be getting a new mortgage through a broker at the moment.

You shouldn't pay a fee to a broker unless they get you a mortgage (and there are some that are fee-free and just take commission from lenders). See our full help on how to find a good broker.

7. If you've got savings, they can bag you a better mortgage deal. Consider using any savings you have to get a cheaper mortgage. Rates tend to improve as you move down to 90%, 80%, 75% and 60% LTV, so when you remortgage, use savings so you need to borrow less. Use our Compare two mortgages calculator to see if it's worth it for you.

PS: A note to mortgage prisoners. If the current mortgage situation of rising rates is bad for most mortgage holders, we know it is an escalating, desperate nightmare for the up-to-200,000 mortgage holders - many still suffering the fallout of the 2008 financial crash - stuck paying expensive mortgages to companies that don't issue new mortgages.

We've been campaigning on this desperate issue for a number of years. Martin has recently funded the third and final mortgage prisoner report from the London School of Economics, to come up with costed policy solutions which we will try to take to the Government.

We do have a Mortgage prisoners help guide though, and while it's slim pickings, it is worth a look if you haven't already.