Mortgages- so you know

[Tempname1234567]

Friendly reminder than unless you’re on a variable rate tied to BBR mortgage rates have nothing to do with the Bank of England base rate.

the rate reducing isn’t the magic bullet so don’t think you can game the market. You should do what’s right for you right now.

posting because I see a lot of misinformation spread on social media right now on the base rate being the lowest in X years

How many people would not know this? Surely people know what their mortgage product is?

Slightly patronising

Never underestimate the ignorance of the general public

Obviously!

It’s not people don’t know what product they are in that people do think more generally that because the base rate has come down mortgage rates will follow, so when their fix is up they might get a cheaper rate but it doesn’t really work like that. Fixed mortgage rates have nothing to do with the base rate

Do you know how mortgage rates are set?

a lot of people think mortgages are priced from the base rate.

the base rate could be 2% and you could easily still see mortgage rates that are 4%+ and the inverse is true as well

Fixed mortgage rates have nothing to do with the base rate

That’s not quite true. There isn’t a direct correlation between them, but changes to the base rate certainly influence mortgage rates for most lenders.

Surely if you are hoping to move, the extended part of the mortgage will potentially be obtained at a lower percentage point than the mortgage taken a few years ago when they were at their highest and you took a set rate mortgage?
If I have failed to understand this correctly, I’ll join the other ignoramus’s …

No, the banks cost of funds is based on overnight Sonia. At the moment there is a mirroring BUT they can divorce.

youre mistaken, fix rates are priced on swap rates which will factor in a whole host of economic factors, swaps rose after the br was cut, so it doesn’t always go down

potentially but it’s nothing to do with the base rate. Lenders this year have been more generous passing on swap reductions, last year they were all pretty greedy as swaps were very low sep 24

Also this is my job, so I can’t say with authority you’re mistaken

Could you please explain what overnight Sonia and swap rates are please?

@Tempname1234567yes I’ve had a mortgage for a lot of years!

But you don’t price them or set the rates on them I do.

ive also had hair for a lot of years, don’t know anything about how to cut it.

fixed rate mortgages are not priced on the base rate

Not tied to it, but often influenced by it.

On Sonia is the overnight interest rate that banks lend to other banks.

Swap rates are the same basically but forward looking, 1 yr, 2 yr etc

Not really no

The wider economic factors that might lead to a rate cut may influence swap rates in downwards or vice versa but, swaps fell hugely with news of trump tariffs not a base rate reduction then was there.

it is a big misnomer that they are related/ move in tandem

Fixed mortgage rates are based on swap rates, not SONIA.

Apparently not

Yes! Which is exactly what I said! Hence why the BR doesn’t influence mortgages. Why are you correcting me to say the exact thing is said? Weird

the cost of funds is based on ON Sonia which influences the margin needing to be made on the mortgage

So why do savings rates go down as soon as the BOE base rates go down. Taking with both hands?

Because on Sonia rn mirrors BBR but they aren’t the same but they can divorce, on Sonia is a smidge below BR

Hell, even mortgage provider is confused.

They are citing a tracker rate. A tracker is a variable mortgage linked to an index, that index can be but isn’t always the Bank of England base rate, often most lenders will adjust their svr to follow the changes in base rate.

as you’re googling, google how fix rates are set