What do inflation figures mean for mortgages?

Brace yourselves for an influx of house hunters over the coming months. The Chancellor's plan is finally working as Rishi and Jeremy give inflation a good kicking - we expect inflation to fall to 4% or below by the end of the year. Clearly, the ripple effect of this good news is about to hit the housing scene. We're talking lower mortgage rates, boosting buyer confidence and turning peoples' property dreams into reality. But, hang on, it's not all sunshine and rainbows. We still have a nationwide puzzle to solve – there's just not enough housing stock in the market. The demand is soaring, but supply is short. 2024, get ready to witness a property market explosion - not fireworks, but a steady climb in those house prices. For the property market to go from zero to hero, we need inflation to keep doing its disappearing act. And how about the Bank of England throwing in a rate cut for good measure? That's the secret sauce we need to supercharge the housing game in 2024.

This is no doubt great news but if we've learnt anything over the last 12 months it's to not get ahead of ourselves. Lenders have been working hard over the last few weeks reducing their rates and I think I speak for us all when I say long may that continue, it's certainly pumping some life and confidence into the market after an extremely dreary period since the Autumn budget last year. With some lenders on both BTL and residential sides now offering propositions below 5% I think it creates an exciting space for Q1 2024. Fixed Vs Tracker is the golden question, certainly, a circumstantial preference that is dictated by a client's attitude to risk and their financial stability, if there is anyone with a remortgage or home move pending speaking to a whole of the market broker is more important than ever to see what product suits their needs best.

The more promising inflation figure at 4.6% does lead you to think that the Bank of England could start 2024 on a more positive note with a drop in base rate in their 1st Feb meeting. This drop in inflation, although still over double the government's target, will add further fuel to the UK mortgage lender fixed rate price war that has been raging for the past few months - so great news for the general public to come as we close out 2023 with lower mortgage rates. We think it's long overdue now for the capped rate to return to market, at times like these.

I fully expect mortgage rates to reduce further in the coming days and wouldn’t be surprised to see a number of lenders offering options sub-4% before the new year.

It is likely that the base rate has peaked and will reduce over the next couple of years. In the short term, a tracker would make sense for a lot of people. However, it does depend on the individual situation and brings level of risk as the mortgage cost would go up if base rate increased further.

Today's encouraging inflation figures are a beacon of hope for mortgage rates. As inflation steadies, we're eyeing potential base rate cuts in early 2024. Meanwhile, lenders are fiercely competing, nudging mortgage rates down. Expect to see 5-year deals nearing 4% by year-end, with a promising dip below 4% in 2024

Big lenders like Halifax & HSBC already announced big rate reductions ahead of todays announcement. It’s almost like they knew what was coming.
Fixed rates may be falling but trackers are not as the base rate remains the same. I don’t think we’ll see tracker rates fall until inflation is around 2.5% and then don’t expect the kind of rates we got addicted to in the previous 5 years.
Whether to go for a tracker or a fixed it’s completely down to individual circumstances, but one thing the last few years has taught us is probably that you shouldn’t try and predict the market when making that choice, make it based on your own circumstances and preferences.

The optimistic inflation data today offers a glimmer of optimism for mortgage rates. With inflation stabilising, there's definite anticipation of potential base rate cuts in early 2024. Simultaneously, fierce competition among lenders is pushing mortgage rates downward and the trajectory of cuts so far means that 5-year deals could approach 4% by the end of the year, with the expectation of dipping below 4% in 2024 a realistic one.

For those inclined to take risks on the speed of reductions throughout 2024, tracker deals may be worth considering, however, given the likelihood that BOE base rate reductions will be slow and steady rather than dramatic and with lender fixed rates across 2, 3 and 5 years deals projected to drop well below 5% and possibly even 4% in the coming months, the sacrifice of stability and risks taken on a tracker may well not be worth any potential rewards.

This is fantastic news, not just for those seeking mortgages, but also for the Bank of England. We've witnessed reductions in interest rates already, indicating that lenders are factoring this into their rates. We may likely experience additional rate cuts from lenders before Christmas, particularly if the Bank of England refrains from raising its base rate next month. The extent to which borrowers gravitate towards tracker products will depend on their situations. Notably, our firm has observed a notable surge in the recommendation of tracker products in the last two months compared to the preceding 12 months.

Stability is the key, the inflation news is great and show shows that we are on the right path, but their is a long way to go yet before we see a base rate reeducation. The good news is that we will see a postive reaction from the lenders, however, with lenders mindful of their current pipelines they are going to look to reduce rates slowly so not causing a mass exodus of people moving away from higher rates making their pipelines profits diminish. It is a balance act the lenders ah e to tread carefully keeping customers and shareholders happy at the same time.

This morning's wider-than-anticipated fall in inflation will have a knock-on effect on bringing fixed mortgage rate pricing down further. Expect lenders to jostle for market share as the rate war intensifies over the coming weeks and months, with lenders continuing to cut their fixed rates to compete in the market. By the end of the year, the majority of mortgage rates besides the really high loan to values will be under 5.00% which will become the new short-term norm. Borrowers should seek professional advice from a mortgage broker as to whether a fixed or tracker rate is the right option for their own individual circumstances.