Copy article

"Wednesday’s inflation figures could be the game-changer the UK mortgage market has been waiting for"

ended 20. May 2024

Ahead of this week's inflation data, and following some cuts from major lenders at the tail end of last week, Newspage asked brokers if a positive inflation print could result in more aggressive cuts from lenders in anticipation of a base rate reduction in June. Could a further fall in inflation spark another mini rate war like the one we saw at the end of 2023 and early 2024?

One said: “Wednesday’s inflation figures could be the game-changer the UK mortgage market has been waiting for. With the long-awaited 2% inflation target finally within reach, we're on the brink of a potential base rate cut that could ignite a fierce rate war among mortgage lenders.”

Another added: “While inflation reducing on Wednesday will be excellent news for the economy and pile pressure on the Bank of England to make that first base rate reduction in June, mortgage lenders have already priced multiple cuts over the next 12 months into their two, three and five year fixed rates. I would expect some rate reductions should we get the first cut to the base rate in June, as many lenders had been predicting August or September, but we are unlikely to witness a substantial free-fall in mortgage rates that everyone is praying for. Better times may lie ahead for borrowers but the golden era of borrowing is long gone.”

The views of 10 brokers are below.

10 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Wednesday’s inflation figures could be the game-changer the UK mortgage market has been waiting for. With the long-awaited 2% inflation target finally within reach, we're on the brink of a potential base rate cut that could ignite a fierce rate war among mortgage lenders. After a barren few years, lenders are hungry for new business, and this could be their golden opportunity. Homebuyers, movers and improvers who have been hesitant are likely to regain confidence in the market, sparking a flurry of activity and ushering in an era of exciting growth and opportunity for everyone involved. We could be ready for a dynamic shift that could rejuvenate the housing market and bring better times ahead.
Star Quote
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
While inflation reducing on Wednesday will be excellent news for the economy and pile pressure on the Bank of England to make that first base rate reduction in June, mortgage lenders have already priced multiple cuts over the next 12 months into their two, three and five year fixed rates. I would expect some rate reductions should we get the first cut to the base rate in June, as many lenders had been predicting August or September, but we are unlikely to witness the substantial free-fall in mortgage rates that everyone is praying for. Better times may lie ahead for borrowers but the golden era of borrowing is long gone.
Copy

Editor
Craig Fish
Director at Lodestone Mortgages
It is looking increasingly likely that we will see a reduction in the base rate at the next meeting of the Monetary Policy Committee and a positive inflation print this week will further boost the chances of a June cut. If inflation drops as expected, expect more lenders to continue to reduce their fixed rate pricing in the coming weeks. My advice, though, is to not delay any decision making as things can change at the drop of a hat. Remember that any rate secured can be changed if a more competitive one becomes available. It's also worth noting that even when rates do drop they will still be higher than people were used to for so many years so don't expect a return to the good ol' days.
Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
Current fixed rate pricing already factors in a base rate cut at some point this summer, so we shouldn't expect fireworks from lenders immediately if inflation drops. The debate will need to focus on the next rate cut, as future base rate pricing will have a serious effect on Swap rates, which drive mortgage rates. A rate cut from the Bank of England will likely be interpreted as a sign that the worst is now behind us, which will give the homebuyers a serious confidence boost. We have seen fixed rates increase by around 0.5% in the last couple of months, so we have some space to make cuts before we are close to January's pricing, but that first cut is unlikely to be the deepest.
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
With inflation predicted to continue its downward path, the markets should react positively, as will lenders that are eager to make up for a sluggish 2023. Are lenders geared up to cope with an influx of business in the second half of the year? From what I have seen, most will struggle and continue to use mortgage rates as a mechanism to ensure they don't get swamped, to the detriment of borrowers around the UK.
Copy

Editor
Ben Perks
Managing Director at Orchard Financial Advisers
I’m optimistic about the upcoming inflation print and the impact it will have on mortgage pricing. The Government and Bank of England seem obsessed with hitting the 2% target, so as we edge closer to this, conditions should improve. A positive print on Wednesday will increase pressure on the Monetary Policy Committee to reduce the base rate next month, which will bring welcome relief to borrowers.
Copy

Editor
Dariusz Karpowicz
Director at Albion Financial Advice
I'm not sure whether inflation data alone will immediately trigger a positive outcome from lenders. It's unlikely that we'll see big decreases in mortgage pricing within days. While a positive inflation report could nudge lenders towards cutting rates, these adjustments typically unfold gradually. If inflation hits the Bank of England's 2% target, we might see more competitive rates, but it's too soon to expect a full-blown rate war like late 2023 and early 2024. My advice to borrowers is to stay informed and be ready to act quickly if rates do start to drop. This week’s mortgage rate environment may not change dramatically, but it’s worth keeping a close watch on.
Copy

Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Expecting a positive inflation figure this week is akin to expecting Rishi Sunak to be Prime Minister at Christmas, namely highly unlikely. With economic data showing we bounced out of recession quicker than expected, it probably means that inflation may have ticked up rather than fallen to a level at which the central bank will cut rates. Summer won't see a rate cut from the Bank of England. Instead, this will come in the autumn when the economy is likely to dip back into the doldrums.
Copy

Premium
Elliott Benson
Owner at Sett Mortgages
My advice to borrowers currently would be not to panic and keep in touch with their bank or broker. We keep seeing rate cuts, increases and then rate cuts again. Some positive figures on inflation would be a catalyst for another rate war plus if we can get the base rate down also we could see light at the end of the tunnel
Copy

Richard Jennings CeMAP
Founder & Managing Director at Richard Jennings Mortgage Services
I'm very hopeful of some more positive news on inflation this week. If as predicted this does drop down to the 2% mark then this puts huge pressure on the MPC to lower base rate. I don't envisage many lenders making too many reductions based purely off inflation, many I imagine will maintain rates as they are until Base Rate drops as the eek out their net interest margin and profits for as long as possible.

Advice to borrowers remains the same, of you've found a house or new deal that is within budget, you can afford the payments and still afford to live then proceed now. Trying to play the market can backfire, in February clients were waiting for a March rate reduction and interest rates actually went up.