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"Recent uptick in swap rates likely to translate into a modest increase in mortgage rates"

ended 23. September 2024

Sonia Swaps, which fixed rate mortgages are priced off, have edged up since the CPI print and interest rate hold last week, with 8 members of the Monetary Policy Committee voting to leave rates at 5%. Newspage asked brokers where mortgage rates could be headed next and what the major road bumps could be.

One, Craig Fish, Director at Lodestone Mortgages & Protection, said:  The most concerning is the upcoming Budget. We all remember how the wrong words rattled the markets in 2022, so let’s hope history doesn’t repeat itself. The decision-makers at Threadneedle Street are more likely to bring 'bah humbug' than Christmas cheer. The final quarter of 2024 might be far from merry, despite the festive décor. Buckle up for a potentially bumpy ride this winter."

Meanwhile, Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments, said: “A recent uptick in swap rates, a key indicator of lenders' borrowing costs, is likely to translate into a modest increase in mortgage rates across the board or, at the very least, a pause in rate reductions. The path to lower rates is unlikely to be smooth, and while the long-term trend suggests improving affordability, the potential for short-term rate increases means that delaying decisions in hopes of significantly lower rates could be a risky strategy.”

Darryl Dhoffer, Mortgage Broker at The Mortgage Expert, added: “In the wake of Threadneedle Street holding interest rates at a formidable 5%, Sonia Swaps, which fixed rate mortgages are priced off, rose. And lenders have been relatively quiet after months of continuous cuts. This is not good news for those burdened with mortgages. Lenders, ever-ravenous for profit, will undoubtedly pass on these increased costs, tightening the noose around the necks of borrowers. The dream of lower mortgage rates may, for now, be over. The 8-1 vote in favor of maintaining the base rate casts a shadow over the prospect of future rate reductions. Until the elusive 2% inflation target is consistently met, the Bank of England will remain steadfast in its stance.”

Emma Jones, Managing Director at Whenthebanksaysno.co.uk, concluded: “Rates will continue to drop marginally as we’ve seen already the past few weeks. However, I very much doubt there will be major reductions so for anyone sat on a standard variable rate waiting for that major drop, then I’d recommend considering taking advantage of the current offers available.”

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7 responses from the Newspage community

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Darryl DhofferVerified
Founder at The Mortgage Geezer
In the wake of Threadneedle Street holding interest rates at a formidable 5%, Sonia Swaps, which fixed rate mortgages are priced off, rose. And lenders have been relatively quiet after months of continuous cuts. This is not good news for those burdened with mortgages. Lenders, ever-ravenous for profit, will undoubtedly pass on these increased costs, tightening the noose around the necks of borrowers. The dream of lower mortgage rates may, for now, be over. The 8-1 vote in favor of maintaining the base rate casts a shadow over the prospect of future rate reductions. Until the elusive 2% inflation target is consistently met, the Bank of England will remain steadfast in its stance. The United States, with its divergent economic circumstances, may afford itself the luxury of rate cuts, but Britain is is shackled to a different economic reality.
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Gabriel McKeownVerified
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The mortgage rate rollercoaster may start taking a gentle uphill climb, but for savvy borrowers, the ride is far from over. On the heels of the Bank of England's decision to hold interest rates steady, mortgage rates may begin to inch upward in the coming weeks. A recent uptick in swap rates, a key indicator of lenders' borrowing costs, is likely to translate into a modest increase in mortgage rates across the board or, at the very least, a pause in rate reductions. The path to lower rates is unlikely to be smooth, and while the long-term trend suggests improving affordability, the potential for short-term rate increases means that delaying decisions in hopes of significantly lower rates could be a risky strategy. However, while the era of rapidly falling mortgage rates may be pausing for breath, the market remains in a far more favourable position than it was a year ago.
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Craig FishVerified
Director at Lodestone Mortgages
Mixed economic data and the upcoming Budget could dampen hopes for any further rate cuts before the end of 2024. With a significant wage increase for junior doctors, more pay rises planned next year, a rising energy price cap as we head into winter, and increasing owner-occupier costs, there are several worrying factors. The most concerning is the upcoming Budget. We all remember how the wrong words rattled the markets in 2022, so let’s hope history doesn’t repeat itself. The decision-makers at Threadneedle Street are more likely to bring 'bah humbug' than Christmas cheer. The final quarter of 2024 might be far from merry, despite the festive décor. Buckle up for a potentially bumpy ride this winter.
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Simon BridglandVerified
Director at Charwin Private Clients
With inflation keeping the base rate on hold again, I feel that we won’t see any other rate drops to get excited about until after October’s Budget. Fixed rates are likely to hold firm until markets react to Rachel Reeves doing her worst.
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Ben PerksVerified
Managing Director at Orchard Financial Advisers
Have faith, rates will continue to fall. Unfortunately they won't drop like a stone, but we'll see more of a gradual decline. But better times are ahead for borrowers even if we have to wait a little longer for that next cut to the base rate.
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Dariusz KarpowiczVerified
Director at Albion Financial Advice
The recent Bank of England decision has certainly thrown a curveball at the mortgage market. Like a cricket match interrupted by a sudden downpour, we're seeing a temporary pause in play as markets recalibrate their expectations. However, this hiatus in the downward trajectory of rates is likely to be short-lived. Give it a fortnight or so, and we might witness lenders reaching for their rate-cutting tools once again. It's rather like navigating the London Underground: there might be the odd delay, but we're still heading in the right direction.
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Emma JonesVerified
Managing Director at Whenthebanksaysno.co.uk
Rates will continue to drop marginally as we’ve seen already the last few weeks. However, I very much doubt there will be major reductions so for anyone sat on a standard variable rate waiting for that major drop, then I’d recommend considering taking advantage of the current offers available.