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Lenders Reprice: Will Rates Drop as Fast as They Rose?

Journalist: Riz Malik

ended 09. August 2023

Several lenders have recently indicated plans to adjust their fixed rate mortgages due to positive market conditions. Notably, for much of this year, lenders have been increasing rates with minimal warning. UK newswire, Newspage, asked brokers if lenders will be as quick to reduce rates as they were to hike them.

10 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Unfortunately, we cannot measure this, and we rely on the lenders to behave appropriately. However, considering many are lagging behind their past year's activity, we hope competition will lead to competitive pricing. The remortgage market has been largely overtaken by product transfers since the mini budget. So, if lenders aim to grow their mortgage book in 2023, they'll need to offer more attractive deals than what customers currently receive from their existing lenders. We will see for the remainder of 2023 just how hungry they are.
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Darryl Dhoffer
Founder at The Mortgage Geezer
The majority of lenders don't show the same promptness when lowering prices as they do when raising rates. On the one hand, lenders are businesses and they are ultimately motivated by profit. If they see an opportunity to make more money by lowering rates, they are likely to do so. On the other hand, lenders may be hesitant to lower rates too quickly, as they don't want to lose money on existing mortgages. Lenders may be more likely to lower rates if they see a significant decline in demand for mortgages. This could happen if the economy slows down or if people become more pessimistic about the housing market. Lenders may also be more likely to lower rates if they see a decrease in the cost of funding mortgages. This could happen if interest rates fall in general or if there is an increase in competition among lenders. Borrowers can help to ensure that lenders lower rates by staying informed about the market and by being prepared to act quickly.
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Elliott Culley
Director at Switch Mortgage Finance
Lender pricing is dictated by the swaps market. For June and most of July, the swap market was rising very quickly and lenders had to react to that. Right now we are seeing a slow reduction in swap rates and lenders are reacting in line with that trend. It must be said not all lenders are reducing their fixed rates yet, so there is certainly more caution right now as the market is susceptible to sudden spikes and it comes down to the individual lender's appetite to lend currently.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Throughout the last 18 months, borrowers have faced sudden rate increases, prompting concerns about affordability and economic impact. The speed at which rates will come down hinges a lot on economic stabilisation, what outlook lenders take over the coming months, and the bond market dynamics. One needs to be constantly vigilant to ensure you can swiftly reap the benefits of falling market rates when they arrive. Lenders need to communicate their intentions clearly and transparently. This includes providing borrowers with timely information about rate adjustments and ensuring that borrowers are informed about potential reductions. While it is challenging to predict with a crystal ball whether rates will drop as fast as they rose, the convergence of positive market conditions and early shoots of recovery along with a reduction in inflation bodes well for potential rate reductions over the next 12 months
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
With some stability, lenders will start to compete for business, which could mean a sharpening of pricing. Whilst we all wish rates would drop as quickly as they rose, in reality, if it does happen, it will likely be a much slower trajectory. We're trying to review client situations regularly to ensure that any offers we've secured are still the best option for the client prior to completion. This can mean shifting the offered product to a new rate, but every situation is different.
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George Sanford
Specialsit Advisor at VIBE Specialist Finance
This is where a good broker really comes into their own, as they are on top of market changes and ensure that live cases are always on the best rate possible. Whether or not lenders are as keen to pass savings onto clients is yet to be seen, but a particular area my clients and I would like to see this in is the arrangement fees, with fees of 5%+ becoming all too common. Lenders can really stand out by taking a proactive approach and repricing existing cases onto the lower rate products — assuming no change to other fees — which will be a welcome surprise after the months of ridiculously short deadlines brokers have had to deal with.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
In the ever-evolving financial landscape we're in, lenders have been swift to raise their rates. However, when it comes to reducing them, the same speed is noticeably absent. Drawing a parallel with savings rates, it's evident that several banks have been less than prompt in passing on rate hike benefits to their savers.
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Gary Boakes
Director at Verve Financial
Lenders are currently worried about their pipelines, and if they reduce the rates too quickly then everyone will be jumping ship to the cheaper rates, meaning that the pipeline will be losing its margin and lower profits. So I expect it to be a very slow decrease. It is a shame that it is the case, as lender margins are as high as they have ever been at the moment due to the lack of purchase business, so collectively they could lower rates and stimulate the market. Unfortunately, shareholders come first and lenders are not allowed to talk to each other, so the constant second-guessing about what their competitors are doing is costing borrowers money.
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Gareth Davies
Director at South Coast Mortgage Services
You tend to see rates shoot up like a rocket and come down like a feather. It's promising that we've seen numerous reductions in the last week, on more than one occasion from some lenders, too. It will be very interesting to see what happens around the time of the next inflation announcement late next week. Next week could determine the mortgage outlook for the rest of the year.
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Ben Tadd
Director at Lucra Mortgages
It's unlikely we will see lenders lowering their rates as fast as they hiked them following the mini-Budget and for much of this year, too. Cuts to fixed rates will largely be dictated by continued positive inflation data and swap rate reductions, but will also be heavily influenced by lenders' willingness to grab market share and the competition this brings. Borrowers will need to keep a close eye on the market and assess their rate options right up until their current deals end, or their mortgage offers on their new houses are about to expire. This is where brokers are invaluable at the moment in such a fast-changing rate environment. Brokers can alert borrowers to positive rate changes and actively switch their clients onto better deals often at the touch of a few buttons, so it's worth borrowers entrusting the help of a broker to help with reaping the benefits of falling market rates.