Mortgage rates still falling despite Bank Rate rise

It is important to remember that back in September and October of last year due to the mini-Budget there was a significant amount of turmoil in the money markets and this caused rates to have no real correlation to the Bank of England base rate. What we have seen recently is the return of a bit of normality to the markets, which has meant that lenders have been able to reduce their rates. In addition to this, fewer buyers due to a slowdown in the market has meant lenders have had to start competing for business, which has encouraged the decreases in interest rates over the past few weeks. We have noticed this trend and it has meant savings for our customers. I had a customer last week who was able to save over £150 a month compared to the interest rate I was originally able to offer them back in December.

The competition in the fixed-rate market is getting hotter with the main lenders wanting to be the best-priced. There is another mainstream lender who is reducing all their fixed rates on Tuesday 7th Feb. We've seen many lenders do it over the past few weeks and there's no signs of it slowing down. This competition has come at the right time as it is attracting more people back to the housing market, which in turn shouldn't see property prices drop as much as more people will want to buy. It's reassuring for those looking to remortgage as the rates aren't as high as before, but ultimately still higher than they are on, so definitely speak to your broker about the best way forward.

Rates are dropping every week, and I expect this to continue. Lenders were anticipating the base rate to increase last week, but it has not changed their stance on mortgage rates. In reality, it is unlikely that mortgage rates will be at the same level in five years, and most expect them to be lower. We have seen a shift in clients looking to go for a 5-year fixed to 2-year fixed, or more often than ever, a tracker rate.

Competition between lenders is great to see. It's driving rates down, which is extremely welcome news for our customers who are purchasing and remortgaging. With the ISA season in full flow now, the banks will have more cash to offset, so expect rates to continue to drop as lenders look to be on top of the rates and start 2023 positively. Speaking to two of the top 10 lenders' BDMs last week has highlighted how competitive this year will be as their lending targets are higher for 2023 than in 2022.

With fewer people likely to move in 2023, lenders are fighting to win market share from a reduced pool of customers seeking mortgages. As a result, we have seen lenders consistently reduce their pricing on their fixed-rate mortgages to try and gain a foothold on the market. Most days we are greeted with multiple lenders emailing to confirm they will be reducing mortgage rates, which will be a huge relief for the millions of customers needing to remortgage during 2023.

Swap rates, the rate at which lenders can borrow money from the Bank of England, are stable. As long as they stay stable, lenders can stay competitive and bring their margins down to help clients benefit from lower rates. As long as this continues, we will see a very good market for mortgages and a good 5-year fixed selection.

Such is the speed and significance of the fixed rate price war that mortgage brokers up and down the country must be having nervous breakdowns. Every time we apply for a fixed rate for a customer, within no time, it is cheaper elsewhere. I am currently on application number six for the same client in a bid to get them the best deal, which must be a personal record since I started advising back in 2008. On one hand, it's great, but on the other, insomnia.

Fixed mortgage rates are rolling in the right direction, namely downwards, despite the recent Bank of England base rate rise. This had all been factored in as happening by the market before the Monetary Committee met. Seeing the first sub-4% fixed rate appear back on the spreadsheet last week from a very positive-thinking lender was a great sight at the end of the first month of 2023. It seems that lenders are going to have to go back to thinking as they did before the 2008 banking crash in releasing mortgage products that the public needs, and at the right price point.

With the housing market slowing, lenders are battling to maintain market share and profitability. Perhaps even more importantly, the base rate may have peaked at 4% though that's by no means guaranteed. With swap rates falling, banks and building societies are more confident in pricing their products. But I don't see fixed-rate deals falling much further until the Bank of England lowers interest rates.

Fixed rates have fallen since the beginning of 2023 and will continue to do so as lenders compete with each other. As soon as a lender announces a rate reduction, within hours a competitor will reprice their offering. If you haven't drawn on your fixed-rate mortgage yet, you might be able to get a cheaper deal. The question now is when will the rate drop below 4% for a 2-year or 5-year fixed, and which lender will be first out of the blocks. This should boost buyer confidence.