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If inflation falls, will fixed rate mortgages edge down further?

Journalist: Callum Mason, i

ended 17. October 2023

If, as expected, inflation falls slightly tomorrow, Newspage asked brokers whether fixed mortgage rates could come down further in the days and weeks ahead — and what could happen if the inflation data disappoints. Their views are below.

11 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
A small fall in inflation would give the Bank of England reason to maintain the base rate at its current level. This would likely see continued small reductions in fixed rates, as lenders compete for the lack of business out there right now. However, there will not be any significant mortgage rate decreases unless there is an equally significant drop in the inflation figures. And that could not happen until next year.
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Graham Taylor
Managing Director at Hudson Rose
All eyes are on the hotly anticipated inflation data this week. After a marginal decision to hold the base rate steady at the last meeting, it is difficult to tell whether lenders have factored their expectations on the base rate into their current rate offerings. If lenders have been waiting for the latest data and inflation falls further, we could see further cuts to the fixed mortgage rates currently available. However, if lenders are surprised by the figures and believe a rate rise is on the cards in early November, it may cause some swift withdrawals from the market, only to be replaced with higher fixed rate products.
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Lea Karasavvas
Managing Director at Prolific Mortgage Finance
Surprisingly, swap rates spiked a little following last month's drop in inflation and base rate hold, but they have settled again over the past few weeks. Lenders have shown their hand by reducing rates significantly and with 5-year money starting at around 4.73%, a further downward trajectory in inflation could stabilise the base rate and really allow lenders to fill up their diminished pipelines for 2024 by pricing even more aggressively and ending the year on a high. It’s been a hugely unpredictable time in the money markets, but any downward movement could see some joy for borrowers as the year concludes, giving lenders renewed appetite to gain market share after a disappointing 2023.
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Justin Moy
Managing Director at EHF Mortgages
If inflation drops slightly, I think we will see more small reductions as has been the pattern for the last few months, but nothing more than that until the end of the year at least. Inflation will eventually reflect the increased costs of fuel and oil that we are seeing worldwide, and we are still quite a way off our target of 2%.
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Simon Bridgland
Director at Charwin Private Clients
Even if inflation drops slightly, I don’t believe we will see the sizeable drops in fixed money that we’ve had of late. Other pressures such as fuel prices will mean inflationary falls, if they do happen, may be tiny. With conflict in the Middle East, a sudden drop in mortgage rates isn’t something I imagine happening anytime soon.
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Elliott Culley
Director at Switch Mortgage Finance
If inflation does fall, we are likely to see more of the same with rates slowly but surely coming down. A lot depends on the forecasts moving forward as well. If these are positive, expect more rate reductions. Lenders will be trying to get as much business in as possible before the end of the year so the market is likely to remain competitive in the short term.
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John Choong
Senior Equity Research Analyst at Investing Reviews
With markets already anticipating headline CPI to fall, fixed-rate mortgages are unlikely to see a huge move downward on Wednesday even if September's inflation figure comes in at the expected 6.5%. That said, further retrenchment in mortgage rates cannot be ruled out entirely either, as this may be possible if inflation comes in lower than 6.5%. This would especially be the case if core inflation comes in lighter than the 6% markets are forecasting, given how sticky it has been. A cooler-than-expected core print could signal that wage pressures are beginning to ease along with consumer spending. Consequently, this could force the Bank of England to hold the bank rate steady in order to avoid triggering a recession by overtightening.
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Graham Cox
Director at Bridging Hub
Lower mortgage rates all depends on the inflation outlook, not just the headline rate. The money markets need to be convinced inflation will continue to decline. One major concern is geopolitical tensions in the Middle East in addition to those in Ukraine. We could see higher energy prices if the fighting escalates or spreads to other countries, further increasing inflationary pressures.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
Mortgage rates are walking a tightrope right now. If inflation dips, we could see rates inching down as lenders hustle for year-end business. But let's not forget the wild cards: rising tensions in the Middle East and the continuing war in Ukraine could spike energy prices and send inflation and mortgage rates up again. So, if you're eyeing a mortgage, stay nimble and keep your ear to the ground.
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Austyn Johnson
Founder at Mortgages For Actors
If inflation drops further and the base rate and swap rates also come down, we could end up with a lovely market for a quick buying boost before Christmas. If we can then get into 2024 already on the move, it could be a super summer next year after a stagnant 2023.
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Ben Tadd
Director at Lucra Mortgages
Assuming the inflation numbers continue to show a downward trajectory again in this week's hotly anticipated inflation announcement, fixed-rate mortgage pricing is predicted to remain stable and will likely even continue to nudge down a little further over the coming weeks. Any price reductions aren't likely to be astronomical, however. But as long as the inflation data is positive, the impetus for the mini-rate war to continue rolling will remain.