January 6, 2022

What Will Happen to Mortgages in 2022?

In her first post of the year, Sharon Duckworth looks at the big, omicron-shaped elephant in the room that could affect your mortgage rate at the start of the new year.

This is a weird time to be attempting to predict what’s going to happen next in the mortgage market. In my last post, for example, I was suggesting interest rates would rise because inflation was on the way up, and that mortgage rates would follow them. 

Well inflation continues to rise, and mortgage rates did indeed head upwards too. But interest rates didn’t. Bizarrely, lenders were so convinced interest rates were going up that they priced the increase into their latest mortgage rates. Then omicron arrived and all of a sudden no one quite seems to know what happens next. It’s as though the world is holding its breath and waiting for data – and what that data tells us could have a big influence on how lenders react.

That’s why, if you go a quick Google of ‘will my mortgage go up?’ or similar, chances are you’ll find opinions of every flavour from ‘yes’ and ‘no’ to ‘maybe’. 

So rather than trying to second guess the pandemic, let’s take a look at what’s likely to happen depending on what the growing volume of data tells us about the latest variant.

Outcome 1: Omicron spreads fast but doesn’t cause serious illness or hospitalisations

Perhaps the best case scenario for the virus is, frustratingly, less good news for mortgage holders. That’s because this would be a sort of ‘as you were’ situation, which would mean the Bank of England could take another look at interest rates and (probably) nudge them up a few points over the next few months in an attempt to tackle inflation (although the jury’s very much out on how effective that would be). Over time, your mortgage rate would inevitably follow.

Outcome 2: The data is unclear. We still don’t know how nasty Omicron is or how effective it is at evading vaccines

If ever there was an invitation for interest and mortgage rates to stay where they are, this would be it. If the data remains unclear, chances are rates will hover pretty much where they are pending a definitive answer one way or the other.

Outcome 3: Omicron spreads fast, evades vaccines and causes significant hospitalisation 

Definitely the worst case scenario as far as the virus is concerned. There may, however, be a slight silver lining for mortgage holders in that, irrespective of the current state of inflation, the fear of further lockdowns and stagnation of the economy would be unlikely to drive interest rates up. It may actually see them temporarily lowered again. That would mean a mortgage rate hike would be unlikely in the short term and a reduction might be a possibility, although you should fully expect them to head upwards again once the immediate Omicron danger is over.

Make us your pandemic mortgage partner

Things are changing so fast right now that it really does pay to have an expert to help guide you. In fact, we expanded our team last year to ensure that we could help more people find the right mortgage for them.

2021 was a really challenging year for many. Furlough and some self-employment grants affected wages and impacted mortgage applications. Some clients who never anticipated needing to remortgage found the curious circumstances of the pandemic forced them to make changes. For others, there were real opportunities. The amount they managed to save through not holidaying abroad or not needing to travel to work meant they could now afford a bigger home (or at least, a bigger deposit and smaller mortgage).

It’s fair to say we have never known a couple of years when so many people faced so many financial surprises, good and bad. It’s been incredibly rewarding to help them and we’re very proud of the way we were able to adapt our services so that we could still help our clients.

In 2022 we celebrate our 21st anniversary and we look forward to continuing being your mortgage partner and helping our customers, whatever the pandemic or economy throws at us. 

If you’re starting the new year in need of some friendly, expert support to find the right mortgage or remortgage for you, we’d love to help. Give us a call now.



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