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"Lenders raising rates has started to undermine sentiment in the property market"

ended 21. February 2024

Over the past 2-3 weeks, more and more lenders, such as Santander yesterday, have been hiking rates. Newspage asked brokers if this has impacted demand. One, Gary Bush, said “many buyers have yet to latch onto the rate bounce”, while another, Richard Jennings, said: “Our clients say the recent rises in mortgage rates have actually been their call to action over fears they may continue to rise.” Meanwhile, broker Michelle Lawson said: “January saw joy, February fluctuations and, based on the current trajectory, madness will define the mortgage market in March.” Mirroring this, broker Bob Singh commented: “Lenders raising rates has started to undermine sentiment in the property market. Prospective buyers are starting to batten down the hatches again.” The views of a selection of brokers from around the UK are below.

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11 responses from the Newspage community

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The handbrake turn in mortgage rates is very worrying for mortgage applicants, however we are seeing a bit of a lag in the general public knowing that the tide has quickly turned. Enquiry levels are still good but applicant expectations are very much, "now is a good time isn't it, rates have come down?" Many buyers have yet to latch onto the rate bounce. This makes for an awkward expectation management discussion. There's a chance more buyers will become hesitant in the weeks ahead as news of rate rises filters through. I think the market will struggle along until the upcoming Bank of England Monetary Policy Committee meeting in March, which is likely to be a hold at worst.
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Whilst rate rises are never a good thing, we have actually seen our enquiry levels increase over the past few weeks. Our clients say the recent rises in mortgage rates have actually been their call to action over fears they may continue to rise. When rates were dropping this incentivised the general public to almost sit tight with a "there might be a better rate next week" mindset. What instability in rates does cause over the medium to long term is uncertainty in the market, which is never a good thing.
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The yo-yoing of mortgage rates is doing nobody any favours. January saw joy, February fluctuations and based on the current trajectory, madness will define the mortgage market in March. The public don't know whether they are coming or going. As brokers, the only thing we can say is do what if right for you for now. If your mortgage is due in the next 6-8 months then start thinking now and get a good broker on board who can secure a rate now before they rise further and change the product if rates come down again before completion. The mortgage market has gone from the sublime to the ridiculous in seven weeks.
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The noticeable U-turn in swap rates has seen lenders, most recently Santander, hiking their rates. Lenders raising rates has started to undermine sentiment in the property market. Prospective buyers are starting to batten down the hatches again. This trend looks set to continue until rates start to come down again. The market badly needs positive economic data to revive the confidence seen of late. The March Budget could provide the impetus the market needs to escape the roll call of bad economic news.
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Sustained mortgage rate instability, which we're now seeing, will inevitably knock home buyer and mover confidence. During uncertain periods, people take a cautious approach and sit tight. Whilst current activity remains reasonably brisk on the back of a positive start to the year, lenders continuing to reprice upwards will definitely start to change buyer sentiment. The fairytale start to 2024 will soon be forgotten if lenders continue to hike.
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Lenders are pointing to one thing only when I probe them about the reason for their rate increases. That thing is SWAPS. The volatility in the mortgage market is frustrating after such a strong start to 2024. It’ll take time to feed through to potential buyers but confidence could take a hit once again. Until we see a base rate reduction, I can’t see anything changing, and we’ll remain in this yo-yo rate climate.
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Despite recent fluctuations in mortgage rates and lender activity, there's still optimism for new home buyers. While some lenders have hiked rates, the anticipation of potential rate reductions from the Bank of England and US Federal Reserve later in 2024 is reassuring. Prospective buyers and homemovers continue to move forward with their plans, demonstrating resilience in the face of market changes. The evolving sentiment reflects a strong underlying confidence in the housing market.
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Oddly there appears to be a severe lag in the information within the industry and that news permeating out to the wider public. So, whilst those in the mortgage world are all talking about rises in swap rates and lenders increasing interest rates, many prospective borrowers are under the impression that rates are falling and will continue to do so for the rest of the year, thanks to confusion around reports in the media about Bank of England rate reductions expected in 2024 and the understandable, but mistaken, thought process that this will mean cheaper mortgage rates later in the year, too.
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The sudden U-turn in interest rates threatens to undermine buyer confidence and could threaten to put into reverse the positive start to the year we have seen. The economic data over the last month has been mixed so lenders are reacting to movements in swap rates as the markets become jittery. We are still seeing a good level of enquiries and the pent-up desire to buy from the past two years is still there but confidence is key and right now the reversal in rates risks slapping that confidence in the face. In a week when some lenders have announced bumper profits, borrowers should rightly be asking, are they being treated fairly by said lenders?
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Regarding the recent increase in interest rates from Santander and possibly other lenders shortly and its potential impact on the mortgage market, I haven't observed a slowdown in inquiries from first-time buyers, home movers, or those seeking to remortgage. It seems that customers are becoming increasingly aware that rates are likely to stabilise in the range of 4 to 5% for the foreseeable future. While Santander has adjusted its rates to manage the surge in applications, I remain optimistic that swap rates will begin to decrease again in the near future.
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The residential purchase market has been significantly quieter of late, which suggests many people are being put off by higher rates and are waiting to see if thing improve before borrowing. That said, I feel many borrowers are adapting to the new norm of higher rates. The increases do not deter people entirely but borrowers are becoming more rate savvy. Higher interest rates are curbing how much people are borrowing. People are no longer willing to stretch themselves on purchases or capital raising. There is more willingness to shop around and everything is being done with the monthly budget in mind. This is a positive by-product of the current climate.