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"The markets have just said 'au revoir' to the mortgage rate war"

ended 08. January 2025

Some were expecting lender competition to heat up and rates to come down in early January ahead of the stamp duty deadline. However, a number of large lenders have actually increased rates on selected products this week, SONIA swaps are up and gilt yields are soaring. Newspage asked experts where they think mortgage rates are headed next. One said simply: “The markets have just said 'au revoir' to the mortgage rate war.” Views will appear below until 17:30.

8 responses from the Newspage community

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Tony RedondoVerified
Founder at Cosmos Currency Exchange
The markets have just said 'au revoir' to the mortgage rate war. We are seeing Liz Truss Part Deux with the benchmark 10-year gilt yield this afternoon going stratospheric. Worse still, in April stamp duty goes up again. It's not just 'Au revoir' to the mortgage rate war, it may be a case of 'au revoir' to the UK property market for 2025.
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Gabriel McKeownVerified
Political & Economics Writer at Sad Rabbit - Substack Newsletter
With the UK's borrowing costs hitting highs not seen in a generation, the dream of affordable mortgages is quickly vanishing as market expectations collide head-on with an unforgiving economic reality. The great mortgage miscalculation of 2025 is unfolding, with the anticipated rate-cutting bonanza driven by intense competition among lenders failing to materialise. In addition to a global surge in bond yields, the government's ambitious bond issuance plans have further exacerbated concerns over ballooning national debt, putting upward pressure on gilt yields and subsequently impacting mortgage rates. Additionally, with the Bank of England's decision to hold the base rate steady in December, many had anticipated potential rate cuts in early 2025, however the persistence of above-target inflation has tempered these expectations. As gilt yields continue to reach dizzying heights and economic uncertainties persist, borrowers and lenders are on a financial tightrope.
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Elliott CulleyVerified
Director at Switch Mortgage Finance
Over the past week some lenders reduced rates, but this was mainly smaller societies who had the margin to do so. SWAP rates were fairly stagnant over December and with an increase seen more recently it is no surprise to see rates increase for the more competitive lenders with smaller margins. Rates will be continue to fluctuate this year as the forecast for the UK economy is currently murky with no one in a position to confidently predict the next few months.
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Iain SwattonVerified
Managing Partner at Later Life Property
Optimism for 2025 is melting faster than the January frost. Five-year swap rates at their highest since May at 4.26% shows traders are slamming the brakes on hopes of Bank Rate cuts. Long-term gilt yields are creeping up as markets brace for more tax hikes and stubborn inflation, making a Bank of England base rate cut feel like a distant dream. As the weather turns chilly, it seems the mortgage market might be following suit. The 'rate reduction party' we were hoping for could turn into a long winter of waiting.
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Craig FishVerified
Director at Lodestone Mortgages
We're saying goodbye to the rate war as quickly as we are the festive break. So much for coming back to a positive 2025. Rachel from accounts has worked some real magic on the markets and, sadly, it looks like this is just the start of it. It's going to be a very bumpy ride for at least the first quarter of the new year.
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Ben PerksVerified
Managing Director at Orchard Financial Advisers
Mortgage lenders seem as up for a rate war as I am for the January diet. It's still early days and we may see competition heat up, but at the moment lenders seem lacklustre and stand-offish.
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Jack TuttonVerified
Director at SJ Mortgages
The cycle of pain for mortgage holders continues with the current market. January normally sees mortgage lenders battle it out to win new business at the start of each year, this has not happened this year due to the instability that we find ourselves with. SWAP rates have been increasing significantly since the turn of the year and there seems to be no signs of this slowing, it is only a matter of time until we see lenders pass these increases onto their mortgage rates.
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Dariusz KarpowiczVerified
Director at Albion Financial Advice
Just when we thought January would bring a cosy rate-cutting competition, the mortgage market seems to have other ideas. With swap rates doing their best impression of a mountain climber and gilt yields reaching heights not seen since people still used dial-up internet, the landscape is looking rather different than expected.
Like a disappointing January sales event, the anticipated mortgage rate war appears to be stuck in traffic somewhere. While smaller lenders are still making some sprightly moves, the banking giants seem about as enthusiastic about rate cuts as most of us are about our New Year's resolutions. With economic indicators performing their best rollercoaster impression and the Bank of England playing its cards closer to its chest than a poker champion, we might need to temper our expectations for the rest of January - though in this market, predictions are about as reliable as British weather forecasts.