Have we seen the end of mortgage rate rises?

.

Some experts believe that the end of mortgage rate rises could come in 2023, while others believe that it could be later in 2024. It is important to remember that interest rates are unpredictable, and it is impossible to say for sure when they will start to fall, that said long may the trend of downward rates continue, which we have seen recently.

Here are some factors that could affect the end of mortgage rate rises:

The level of inflation: If inflation continues to fall, the Bank of England may be less likely to raise interest rates, which in turn means lenders will follow suit
The war in Ukraine: If the war ends, it could help to bring inflation down.
The global economy: If the global economy starts to slow down, it could lead to lower interest rates.

Although things are looking positive at the moment we have seen first-hand that at a drop of a hat, the mortgage market can turn and see rates go back up again. So we aren't entirely out of the woods just yet and need to see inflation continuing to fall in the months to come to keep this downward trajectory of fixed rates.

Whilst it's great news to see some reductions, there's a long way to go before rates are even at the level they were in late June. I feel we'll see them fluctuate in both directions for the foreseeable, with service levels being a big factor.

It all seems positive news for mortgage rates at the moment, with inflation coming down faster than the experts had anticipated. Lenders are reducing rates, expecting the Bank of England to pause its crusade for higher and higher monthly payments. However, we do have a governor with cognitive dissonance and will look for any information to continue to inflict pain on homeowners so I wouldn't be betting my house that we have reached the terminal peak just yet.

This week I had to put my notifications on silent, such was the influx of emails from lenders about their rate changes. These reductions (and the occasional increase) seem like good news, but I worry this is just the Honeymoon period before next month's Bank of England base rate decision.

Sentiment over substance remains the driving force behind how things are perceived and so it’s definitely encouraging to see a smattering of reductions from some lenders perhaps starting to change the tone.

It remains the case that - even with this weeks reductions - the average rates are considerably higher than earlier in the year but with the direction of travel appearing to now be heading downwards, the same rates that were being perceived as worryingly high for many are already being noticeably more positively received by clients when it feels like the top of the rate mountain may already have been scaled.

If inflation numbers can maintain a positive trend, then - as with any climb - the descent that can now be reasonably anticipated to follow over the coming months, is unlikely to be without hazards, pauses and be by slow and steady steps, but it is welcomed and definitely does feel like there may be a glimmer of light with a period of relative rate stability or falls.

The sight of High Street lenders now pricing in their fixed rates at a lower level is great to see. We believe that the fixed rates in the past 6 weeks have been pitched by UK lenders at too high a level and this adjustment is very welcome, and we expect to see more of it. We are hoping that the Bank of England will take a pause in increasing the base rate next week and wait and see what the latest CPI (inflation) data shows for us. We are still seeing a reasonable level of applicant interest however since the last BOE increase things have slowed some.

After the turbulence of the past few months, it appears there is a glimmer of hope that rates have perhaps peaked. With inflation falling last month, all eyes will be focused on the Bank of England's MPC meeting next month. If the members decide to increase the base rate, lenders will increase their rates in tandem as the underlying cost of borrowing will increase.

It may not quite be the end of mortgage rate rises altogether, and this is unlikely to be the case until the Bank of England Base rate reaches its peak. But, with lenders expecting to have already priced in for an anticipated smaller base rate rise of 0.25% next week, it is likely at least that mortgage rates won't jump straight back up. This week of rate reductions has at least, however, provided a glimmer of hope to homeowners coming off their fixed deals in the next 6-12 months that the end of mortgage rate rises for a longer sustained period, is hopefully not too far away.

Definitely more optimism in the market, I have been informing my client base on the recent reductions and am having many more come back to me to re-assess figures or re-check affordability as they continue to fall.

If inflation continues to fall, my view is that lenders want to lend and there is still pent up demand from buyers and we will see a race to the bottom among lenders trying to get business through the door before the end of the year.

I believe that the recent reduction in mortgage rates and the overall trend of average rates gradually falling suggest a positive outlook for borrowers. While some lenders have increased their pricing, the fact that 12 lenders have reduced their rates demonstrates a competitive market.

The possibility of inflation continuing to fall and lenders competing for business could further contribute to a potential decline in fixed-rate deals. However, it's essential to closely monitor economic indicators and lending trends to assess the long-term trajectory accurately.

While we may not definitively state that we have seen the end of mortgage rate rises, the current market signals offer optimism for borrowers. I would advise clients to keep a watchful eye on the market and consider seeking expert guidance to navigate these evolving conditions and secure the most favorable mortgage deals available.