Mortgage rates

While inconsistent economic data might fuel speculation of a rate cut, the Prime Minister's surprise election announcement throws a wrench in the works. Snap decisions can jolt money markets, and with the general election looming in July, the Bank of England's June meeting on interest rates becomes a guessing game. This uncertainty could easily extend the current volatility in mortgage rates.

There are many reasons for rate fluctations, mainly markets and business volume. However, there is currently a lot of mixed messaging going on at the moment with just today TSB reducing and Barclays increasing.

Lenders are as confused as economists, with expectations of rate cuts between zero and three moves this year. With CPI reducing, but not as much as expected, lenders have been put in a position of uncertainty. The amount of money they have attracted will impact their rate decisoins, as banks will not want to over leverage themeselves as market leaders, if rates are slower to fall. Ignoring lenders, the pound is a good indicater of how quickly borrowing rates will reduce against our global peers, and the pound was very slightly up on the euro yesterday. This means that sterling will probably stay higher for longer, but central bank rates will start coming down later this summer.

More lenders are cutting rates while Barclays decides to march to the beat of their own drum with rate hikes—talk about mixed signals! It’s not the whole positive outcome we’d hoped for, and with election promises looming, things could get even more unpredictable. Depending on what politicians cook up, rates could swing either way. Let’s hope they whip up some good promises for the property and mortgage sector. In the coming weeks, expect a rollercoaster of rate adjustments as everyone tries to make sense of the political and economic landscape. Hold onto your hats, it's going to be an interesting ride!

The news of the general election and higher than hoped for inflation figures has for the moment caused confliction in the mortgage market. The movements of rates being offered so far seem to show lenders in a bit of a spin as to what to do, although TSB came out of the blocks quickly with some good reductions, Barclays have published a new product offering which has left the broker community puzzled. They seem to have given a token gesture to those purchasing a property but those wanting to remortgage to them or if you are already with them and just looking for a new deal, you’ll soon realise you’ve been left in the cold by increasing rates on offer by roughly 0.25%.

We have to remember that the cost of funds is only one aspect of product pricing, typically lenders will use rate changes to match back office capacity and also risk. For example, lenders who have been busy with low-deposit mortgages will look to encourage applications from lower-risk categories, changing prices accordingly. Pricing decisions tend to be some days in advance, so none would have been made as a direct result of the General Election, but some lenders may have postponed announcements or product changes. Suspect the next few weeks won't see significant changes to products unless lenders are short of applications.