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Five-year swaps rates start with a 3... What can mortgage borrowers make of this?

Journalist: Ruby Hinchliffe, The Telegraph

ended 07. December 2023

Five-year Sonia swap rates have dipped below 4pc at least twice this week. Currently trying to work out when they last did that. In the meantime, would love some commentary on what this means for mortgages and borrowers. How is this affecting the advice you're giving clients? Was this expected so soon?

15 responses from the Newspage community

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Rohit Kohli
Director at The Mortgage Stop
It's a great indicator of where the market is going and hopefully, it means confidence is returning to the markets and will continue to trickle down into the property market. The news that China's exports edged up in November for the first time in 6 months is also a positive sign that consumers are coming back to the market. Let's not be coy though - things are still on a knife edge - it won't take much to reverse these trends but with a competent and cohesive government all pulling in the same direction in the UK we'll be ok...oh wait...
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Jack Tutton
Director at SJ Mortgages
Swap rates in the past couple of weeks have been a bit bumpy but they have started to trend downwards again, this will be welcome news to mortgage holders. Lenders have started a rate war to start 2024 strong, the continued fall in swap rates should reflect in lower fixed rates moving forward. Given the uncertainty that still exists, we are recommending our clients secure a rate while they know what it is and keep it under review until it is due to start.
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Michelle Lawson
Director at Lawson Financial
Continued good news for the mortgage market and consumers. Normally lenders have reached their end of year targets so are not too concerned about rate changes in quarter 4 and attracting more business but we have seen the opposite. Hopefully a good kick-start to 2024 and the market picking up which is good for all as the housing market is key to many other industries and trades.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
SONIA Swaps are a key indicator as to where fixed-rate mortgage pricing is heading, and 5-year Swaps dipping below the 4% threshold is great to see. This on top of the increasingly fierce competition between lenders for business, bodes very well for the 1.4 million or so mortgage borrowers. whose current rates are expiring in 2024. As the pricing continues to fall, expect home movers and buyers to mobilise again, providing a much-needed boost to the property market after a lacklustre 2023.
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Craig Fish
Director at Lodestone Mortgages
This is probably the single best piece of news that brokers could have wished for, and is great news for the 1.4 million mortgage holders coming off ultra-low fixed rates over the next 12 months. The last time that we saw 5-year swaps at this level was around May 2023. It finally feels like things are moving in the right direction and if the MPC holds the base on the 14th and inflation data shows further improvement on the 20th, then they may dip into the 3's and stay there suggesting that it won't be too long before we see a 5-year fix starting with a 3 and a 2-year fix starting with a 4.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The spread between trackers and fixed rates seems to be increasing with many trying to second guess what rate reductions lay ahead.
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Elliott Culley
Director at Switch Mortgage Finance
Swap rates falling below 4% is a significant milestone and haven't been seen since June when rates started to rise again. At the time it was forecast we wouldn't see swap rates this low until mid 2024. I am finding most clients are still more interested in 2 year fixed rates currently as the forecasts will be for rates to continue to fall over the next couple of years. Clients don't want to lock into 5 years on most occasions for a fear of missing out later down the line.
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Steven Hargreaves
Mortgage and Protection Adviser at The Mortgage Co
It is the news we have been wanting to hear. Lenders have been cutting their margins over the last month or so, but with the swap rates reducing to under 4%, we are hoping we have another round of lenders dropping their rates.
We have seen enquiries increase as the fixed rates have been dropping which is really good news, January is traditionally a much busier month than November and December for the housing market, which bodes well for a positive start to 2024.
We have a considerable amount of existing clients who have existing fixed rates coming to an end in the coming months, so Swap Rates reducing will send a positive message to these.
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Graham Cox
Director at Bridging Hub
The money markets clearly think interest rates have peaked, and it wouldn't surprise me if we see a base rate cut much sooner than the Bank of England are indicating, perhaps by the Spring. Desperate to maintain market share in a slow market, fierce competition amongst mortgage lenders means I expect mortgage rates to continue falling for some time yet.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
Is the mortgage market perking up? With swap rates dipping and lenders tripping over each other to drop rates it certainly seems that way. Great news for us homeowners, especially those renewing next year. Here's to a brighter start in 2024, with a hopeful boost to the property market and our wallets!
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Trying to forward-guess interest rates is a dangerous game to play, for clients and advisers. Whilst swap rates are a useful guide to the market's thoughts on where the Bank of England base rate may be in 2, 3 or 5 years' time, they are just that: a guide. There are a thousand different variables that may mean that projection gets turned around; be that a 2009-style run on banks, a 2020-style global pandemic, or a 2022-style mad chancellor. We know there's an election in 2024, meaning there's a high chance that most projections will change, depending on the results of that and the policy announcements made by the winners.
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Gary Bush
Financial Adviser at MortgageShop.com
To see that the driving force behind the UK lending industry's mortgage fixed rates has dropped to a level not seen since last May is very encouraging news. 5 year fixed rates below 4% will take us into the next round of the mortgage lender fixed rate war we have been in since August, we should expect to see the first lenders to announce new exciting deals as soon as Monday. There is a very much-needed enthusiasm returning from property buyers and movers which will launch 2024 with a good level of activity.
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Rob Gill
Managing Director at Altura Mortgage Finance
As rate cuts have inevitably slowed in the run-up to Christmas, the ongoing falls in Swap rates will encourage lenders to launch bumper January sales in the New Year. With 2023 being such a difficult year, mortgage lenders will look for a quick start to 2024.
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Austyn Johnson
Founder at Mortgages For Actors
This is a good start, with any luck, we will have some decent 3% products without the 7% fees in the new year. however, if things are working, someone may try and change it and end up destabilising it. If we can start 2024 with stability, the year will be a good one.
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Rob Molloy
Director at Rosa Mortgages
Mortgage borrowers are currently more exposed than ever to press and media relating to swap rates and what that means for them, however without proper advice relating to their own circumstances it could end up being dangerous in the decision-making process. Swap rates dipping is great news for all mortgage borrowers, however, encouraging people into a 5-year deal purely because the swap rates are lower and therefore the rates being offered are lower, may not be advisable for all. There is a huge consideration on a 2-year fixed rate and being able to be in the market in 2 years times when rates could have dropped even further. Taking advice on any future changes should always be considered by any mortgage borrower in order to full understand how to apply the information to their own situation.