Mortgage rates to cheapen despite base rate rise

UK lenders are likely to cut mortgage rates despite the Bank of England upping the base rate by 0.75% to 3.00% last week, representing some long overdue good news for buy-to-let landlords.

Halifax has indicated that a number of its remortgage rates will be cut by 0.24% this week, bringing typical rates below 6%.

And that could be mirrored across the market.

Andrew Bailey

SWAP rates, which impact of the cost of mortgage lenders’ funding, have normalised now that Liz Truss and Kwasi Kwarteng have been ousted from the heart of government.

Bank of England Governor Andrew Bailey warned that lenders that mortgage costs do “not need to rise as they have done”.

He signalled that future Bank base rate rises will be more conservative from now, as the Bank is keen to mitigate the impacts of an expected recession.

Increasing rates to the 5.25pc level recently expected by markets would trigger a two-year recession and cut household real incomes by £800 in 2023, Bailey said.

He therefore said this serves “as a reminder that we should not increase Bank Rate too far”, adding: “We can’t make promises about future interest rates but based on where we stand today, we think Bank Rate will have to go up by less than currently priced in financial markets.”

Clydesdale Bank, under Virgin Money, has already cut rates on 2 and 5-year fixed rate mortgages, bringing them down to 5.44%.

Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said: “We are expecting fixed rates to continue to fall back slightly — they are still overpriced because lenders don’t have an appetite for a lot of fixed-term lending right now, but with a period of stability, you can expect that to change.”

Comments 1

  1. Just the markets re-adjusting to current circumstances as they always do. As mortgages become less affordable so less are taken up. Lenders are faced with having a thinner slice of the pie or none at all. So for now they take the thinner slice as the least bad option. It seems the same thing is happening with rents in some areas. The softening of mortgage rates might assist some landlords to stay in business which might help reduce the current scarcity of property and reduce the prospect of more homelessness. One thing is for sure as soon as the Government intervenes they always make the situation worse due to unforeseen (by them) consequences.

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