Swap rates react positively to BoE rate decision: "The prospect of the first sub-4% 2-year fixed rate is more than just a pipe dream now"

While the base rate cut was mostly priced into the market, some were unsure it would come this month so we are seeing positive momentum on swap rates already. Let’s hope this continues to drive lender rate reductions so we can see more sub-4% rates and, ideally, at slightly higher LTVs. It's likely more lenders will cut in the days ahead.

The base rate and Swap rates are not directly linked, but the positive nature of today's base rate cut has had an immediate impact on the money markets, with Swap rates now trading around the level last seen in January. The prospect of the first sub-4% 2-year fixed rate is more than just a pipe dream now. Cheaper borrowing will encourage more people to the market, and it may also encourage more to sell and that could have the opposite effect on property prices, as supply improves against demand. But with the mood lifted by the base rate cut, there will be quiet fist pumps from borrowers and a busy end to 2024 on the cards.

The positive news just keeps on coming. The markets have reacted well to the Bank of England's decision to cut the base rate by 0.25%. It was touch and go whether we would see a reduction today but the markets clearly see this as a positive move by Threadneedle Street. Such a strong reaction will lead to lenders making widescale changes should this continue in the coming days. This is much needed for mortgage holders after what has been a very tough few years.