Lenders Lowering Mortgage Rates for Low LTV Products: A Genuine Offer or a Marketing Ploy?

These lower rated for lower risk, to the lender, mortgage rates are a part of the lender tactics being used to generate noise from what is quite meh activity really. We are in a mortgage rate war and when there is no news this method can be used to shout about at least something in response to a competitor's lender's actions. Nothing to see here.

I think we all need to take stock of the hokey cokey of lender rate reductions. Lowering rates just before the Christmas break is hardly risky for any lender, where historically transactions before Christmas are muted. Lenders are good with PR, particularly if the headline rate reductions are for those clients with 40% deposits, as they are less risky and most likely won't be huge volumes. I would have expected with the recent Nationwide and Halifax house price growth, for lenders to drink their cans of "courage" and offer higher LTV products with similar reductions, and for the remortgage products to show similar decreases in rate reductions - not trying to be "bah humbug" but all seems PR driven at the moment from lenders

Rate cuts at the moment are solely for one thing. To generate business in a quiet market. This has been coming for months during the spring and summer lenders weren't pricing to attract new business so not only were purchases down but so were remortgages as it made most sense for the majority of customers to complete a product transfer.

Lo and behold we are coming to the end of the year and I would suspect that most lenders have not hit their lending targets. The only way to rectify this is to reduce rates and try to get some business in now. I would expect to see rates continue to drop in the coming weeks as lenders jostle for position at the top of the sourcing lists.

Let's not look a gift horse in the mouth. Lower rates mean lower repayments for squeezed households and this is only a good thing. Only this morning one of the team revisited a rate for a remortgage ready to complete at the end of November that is now over £200 a month cheaper than it was 3 months ago. Cue a rather happy customer. Whatever the reasons, that is good news.

I believe the key driver here is the level of risk that lenders are willing to shoulder, despite the ongoing surge in house prices. High inflation and lingering economic uncertainty continue to cast a shadow. Consequently, opting for a lower loan-to-value ratio is the less risky route, leading to further decreases in the interest rates for such products. In my estimation, it might not be until March or April of 2024 before we witness any significant decline in higher loan-to-value rates.

Lenders are not reducing rates out of benevolence. Banks are profit hungry machines and they are reducing rates in order to attract business knowing that if their interest rates, which are basically their prices, were higher, people would shop elsewhere. It’s not a PR ploy, it’s a profit ploy and this is how free markets work.
If they are worried about house prices falling then they are more likely to try and attract low LTV business for their books and it reduces their risk.
Despite commentators trying to talk us into a downward spiral, house prices have increased according to Nationwide and Halifax’s most recent price indices. Would bank really be lending at 95% loan to value if they though property process were going to drop 15%? No chance.

Facing the annual dance of rate reductions, the mortgage market's latest shuffle isn't just for show; it's a strategic play. As lenders vie for the safest bets, slashing rates on low-risk deals before the tinsel goes up, it's clear that they're chasing targets, not trends. Yet, for those of us looking beyond the PR sparkle, we're still waiting for a real leader that'll shake up high LTV rates and bring genuine festive cheer to all homebuyers