Story for The Times: Mortgage rates - are we turning a corner?

We had our first lender reduce rates yesterday, which was a great email to receive after weeks of the opposite. I believe the new inflation figures will have given lenders more confidence in the market and hopefully other lenders will follow suit and also reduce rates. I do think it will be a slow process over the next few weeks and won't happen overnight, but hopefully this is the start of us heading in the right direction. Being able to give clients some good news is exactly what us brokers need after a rocky few weeks, and it will also allow us to shine a more positive light on the market which should also help increase activity and give buyers more confidence.

News of inflation and swap rates decreasing this week has been extremely welcomed considering the doom and gloom we've endured since the mini-budget last year. Although this news is fantastic, we must stay grounded with another BoE meeting around the corner and another increase to the base rate expected. Ultimately, the government is still a way off of its inflation target of hitting 5.3% by the end of the year.

It's never easy to predict future forecasts and market reactions, however, we can certainly be quietly confident about this potentially being a turning point with a hope that it begins to restore some confidence and stability in the market. If this continues, we’d like to expect an easier transition into 2024 but we must keep in mind this is not us getting over the hill, the impact will take some time to filter through to rates, more a step in the right direction with our fingers firmly crossed for a positive reaction from lenders and a stronger outlook on the market for 2024

Right now, we will take all the positive news we can get. The welcome sight of SWAP rate reductions, followed by modern lenders taking an immediate reaction to reduce rates, is comforting. Shout out to Gen H leading the way with reductions of up to 60 bps. Are things turning a corner and have rates peaked? For me, it's too soon to say, not in this yoyo market, but let’s see.

The fact is that a couple of lenders still increased their deals this morning. Yes, there was a lender with healthy reductions but they were arguably way over-priced to begin with so they are still far from market-leading in that sense. I wouldn't say things are looking good, more that they are just looking a little less worse than a few days ago. A base rate increase is still not out of the question as yesterday's inflation announcement gives the Government the ability to say 'I told you so,' about these constant hikes and their impact on reducing inflation.

Cautious optimism is a phrase I've been using a lot in the last 24 hours, it sums up my feelings about the recent inflation and swap rate data perfectly; I'm happy that we are seeing decreases in both, but I'm also old enough and wise enough to have seen false dawns before, so I'm not going to say Winter has passed until I see several drops across a few months, but I'm enjoying these few rays of sunshine

Whisper it, but just maybe mortgage rates have peaked. Falling rates will be music to the ears of first-time buyers and homeowners alike. Though it's always dangerous to put too much store by one month's inflation figures, it at least provides a glimmer of hope for struggling borrowers that the worst is over.

Whilst averages fall, some mortgage lenders are still actually increasing rates. And whilst my email inbox is recieving less mortgage rate increase updates from banks than in previous weeks, it's still early days following yesterdays inflation announcements.

A deeper dive into the figures, show that inflation figures for Food and
Housing were are at 17.3% & 12.0% respectively.

These are the figures that should ultimately be grabbing the headlines as we head into a stagnating market where many can't afford to spend money on anything else - as the essential costs of living, food and a roof over our heads, continue to rise.

How the markets respond to that data, may still take a few days to come out in the wash...

Hopefully, the early signs of fixed rates dropping over the last couple of days are the start of many more to come - our personal feelings are that these rates have all been overcooked for the past 3 weeks so it's overdue. If the Bank of England are listening to the general public and the financial adviser community they will think long and hard about a rest in the rate increases in their meeting on 3rd August. We'll see

The BofE rate rise has hopefully managed to help curb inflation, whilst we are still likely to see further interest rate rises, this may signal the top end of mortgage rate levels. However, with many people still currently on low rate fixed mortgage products the pain of a new product that jumps from 2% to 5% is still likely to come.

It's certainly fantastic to see the dip in average fixed rates rather than what seems to have been a constant increase recently. It is also nice to see the recent dip in 5 year swaps to 4.65% down from 4.9% in June. Until now the 1 & 2 year swaps have been increasing so to see these drop is certainly promising activity.

However, as much as we'd all like to see a strong decline in rates, I think we still have longer to wait but these are certainly promising signs and hopefully might be enough to limit the approaching increase on 3rd August to only 0.25bp.

The positive inflation data has finally given mortgage borrowers (and advisors) some much needed hope that we may have come through the worst of the rate rises....for now.

It's natural and understandable after such a turbulent period that many will desperately grasp onto this data with gusto but given that the real impact of the increased rates has yet to really be felt in the general economy and housing market it is far too early to be confident that this is us starting to turn the corner.

There is undoubtedly justifiable hope that rates may now start to come down in the latter part of the year however, it is important to be realistic and to expect that these reductions will be neither rapid nor massive and so borrowing costs likely will remain higher than they were pre-mini budget last year when this roller coaster rate ride first began.

So far, I haven't seen much of a reduction in mortgage lenders' interest rates on offer. Lenders have still been emailing this week to advise of rate increases, so I think it is too early to breathe a sigh of relief just yet. Sentiment may have improved but, for now, at least, it hasn't translated into a major lender repricing downwards.

Whilst the average rate is coming down according to Moneyfacts as an adviser I'm still seeing increases and these increases are in the area that most clients will likely fall under. Talking about the average rate doesn't give us the full picture as it will include the lowest possible rate which is likely only available for a very small number of clients and the highest rates which are available for clients who have very specialist needs and issues such as high levels of impaired credit. The reality is that the vast majority of clients I'm speaking with fall firmly in the middle of this and so the rates they are looking at are still lower than the average but also currently still not seeing reductions. Maybe this will filter down and it's a sign we can be optimistic shortly but I'm yet to see any reductions in the areas where it impacts a lot of my clients as yet.

This feels like the back end of October where lenders had priced in worst-case scenarios of the back of the chaoatic mini-budget and a prime minister outlasted by a lettuce. What then happened when those worst case situations looked a bit unlikely was around 6 months of steady rate decreases form. Perhaps we might see the same again.

It's too early to say whether we've reached a peak for mortgage rates but I feel we have further base rate rises to come. We may be seeing the dawn of market stabilisation particularly as some lenders are already trimming their rates and swaps are falling. The key stimulant will be core inflation. If this figure continues to pull back, I believe it will influence rates more than Bank of England decisions. Calling the market requires perfect timing but this is always a gamble. As for the August 3rd BoE meeting, will rates hold or hike? I think we will see a hike and perhaps a peak of 5.75%. What I can say is that we've been bracing for turbulence with our seatbelts fastened. Though there are signs of clearer skies, it's wise to stay buckled up for potential bumps ahead.