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

This is a nice little explanation as the google AI summary was wildly inaccurate

www.dynamo.co.uk/blog/up-or-down-how-do-lenders-set-their-interest-rates/

They also say that fixed rates tend to be influenced by, so I can see how many people would think that.

Exactly I can see why people would think it, but it’s a misnomer. Hence my post

Not all banks use SONIA for mortgage funding costs, some are based on swaps tied to base rate rather than SONIA.

Swaps aren’t tied to the base rate.

youve misunderstood cost of funds. Banks make money is numerous ways, money market, lending to other financial services institutions and some are entirely self funded which is being funded by deposits, most banks use deposits to fund lending though. So that’s what the cost of funds means, how much the bank pays to the retail customer on deposits.

mortgages aren’t price on Sonia, working out a margin on a tracker might be, but fixed mortgages aren’t priced on Sonia, they are priced on swap rates, not the base rate. Swap rates are independent from the base rate

You have missunderstood the OP. People in glass houses....😂

I'm aware of how funding costs work in a bank, and that the true costs are based on a mixture of retail and wholesale deposits. For some banks, the interest rate transfer price reflects base rate swaps not SONIA swaps. So market expectations for future movements in base are reflected in the swap rate.

Yes but that’s not the same as mortgage fixed rates being tied to the base rate. I covered that when I said swaps are influenced by various economic factors, such as inflation which in turn will impact how many BBR cuts there might be, as well as any volatility in the domestic and foreign markets. But I think the narrative in the media that the BR comes down ergo my mortgage will be cheaper on renewal, creates a bit of a false understanding about how these things work

many banks are entirely retail deposit funded meaning higher cost of funds and as a result higher rates

interest transfer over a longer period yes because it’s the fixed period swap

I'm really not sure what you are arguing about. I only pointed out that some banks use base rate swaps rather than SONIA swaps.

no one is arguing but swaps aren’t linked to the base rate. So calling them base rate swaps makes it seems like base rate goes down, fixed mortgages rates go down but that’s not how it works.

Do you think mortgage rates will drop near march or are you saying they will be near enough the same as they are just now?
Only asking as iut 2 year fixed is up in march

Any advice greatful. Thanks 😊