5% mortgage rates (again)

[Twiglets1]

Following on from the previous two of these threads both with 6% mortgage rates in the title, I think it's more realistic to return to 5% for this one.

According to this Rightmove article, the current average mortgage rate for a five-year fixed rate mortgage is 4.84%, up from 4.85% last week. The current average rate for a two-year fixed rate mortgage is 5.23%, which is unchanged from last week. The lowest available five-year fixed rate is 4.13%, and the lowest available two-year fixed rate is 4.46% – both unchanged from last week.

On 27th March, the average 5 year fixed rate mortgage for someone with a 60% LTV was 4.35%.
For someone with a 75% LTV it was 4.72% whereas 80% was 4.79%.

For someone with a 90% LTV it was 4.98% whereas 95% was 5.47%.

Two year fixed rate mortgages are slightly higher.

https://www.rightmove.co.uk/news/articles/property-news/current-uk-mortgage-rates/

In your situation I would take a 2 year fix with your current lender and then look around for another (hopefully cheaper) fix in 2 years time, probably staying with the same lender if they remain competitive.

Must be a scary decision but it's great that you have bought your own home, anyway.

If I were you, I would go for a long fix or possibly consider a tracker for a while and reassess. I suspect that rates will rise again, possibly a lot more, at some point in the next few years. The rates will probably fall next year, maybe by a lot but I think this will be temporary. Of course, no one knows the timings of these things in advance. One thing that you can be pretty sure about is that 90% of 'the experts' will be wrong in times of volatility!

And if the £ gets weaker, which is a significant risk!

I would take 5 year fix at least. No one knows where rates will be in 6 months so dont believe anyone who tells you otherwise. This could be a low point in mortgage rates, or a high point. Longer fixes makes it much much easier to budget

Exactly. Relying on experts and hope doesn't really work. The only way to give yourself security, especially if you are single, is to take a long fixed term.

Apologies for multiple posts. I've asked MN to delete extra posts.

https://news.sky.com/story/money-consumer-news-latest-live-13040934?postid=8609989#liveblog-body

As previously outlined

‘it follows a budget that analysts fear is inflationary’

"The outlook for interest rates has changed and the market needs to reprice as a result’

"The moves we're seeing aren't small either - often about 0.3%, which will be enough to suppress housing market activity as we move towards the end of the year.”

"We'll need a real and enduring change in the inflation outlook for mortgage rates to begin falling again, which means the recovery is on pause for now."

My take, we bump along at the ‘new normal’ (which is approximately the historical average), but with the risk on the upside until the budget impact starts to be felt, maybe next summer?
Are lenders still stress testing to a higher interest rate?

Express article: Mortgage lenders hike rates 'due to rising funding costs' fuelled by Labour Budget

Mortgage lenders have raised interest rates this week, spurred by rising funding costs following the Chancellor’s Autumn Budget.

TSB Bank has increased fixed mortgage rates by up to 0.3%, while Santander has raised rates on deals by up to 0.29%.

HSBC has also increased interest rates for the second time in two weeks across a number of its fixed-term mortgage deals. This comes despite the Bank of England announcing a central rate cut to 4.75% last week in response to sustained lower inflation rates.

Brokers have said the mortgage rate increases are likely due to the “rising cost of funding” following the Labour Budget and Donald Trump's US election win.

Gilt yields, which are the interest rates paid on British Government bonds, spiked after Rachel Reeves’s Autumn Budget, signalling “underlying uncertainty” from investors. Gilt yields affect swap rates, which are predictions of future interest rates. Swap rates typically move in tandem with gilt yields.

Rohit Kohli, director at The Mortgage Shop said "Many borrowers will be left scratching their heads as to why, less than a week after the Bank of England cut the base rate by 0.25%, lenders like TSB are increasing fixed rates.

“The markets are still feeling the aftershocks of the Labour Budget. Although it wasn’t as disastrous as the mini-budget, the longer-term cost of borrowing continues to rise. Gilt yields and SWAP rates are reacting not only to budgetary policy but also to geopolitical uncertainties, including Trump’s re-election to the White House.” He added: “Anyone holding out for big cuts in interest rates is taking a gamble for now".

https://www.express.co.uk/finance/personalfinance/1974928/mortgage-lenders-raise-interest-rates-labour-budget

The lenders have no choice but to increase rates. We have seen a big move up in swap rates in just a couple of months (about 1%). I suggest therefore that the lenders are still behind the curve. Trump winning is inflationary as he will put in place policies to improve growth and in addition to our ill conceived budget, bond markets will need some convincing (and time) before they start reducing yields.

Interest rates to ‘stay higher for longer’ after inflation blow

Interest rates risk staying “elevated for longer”, economists have warned, after inflation rose at a faster pace than expected last month.

Policymakers are “unlikely” to cut borrowing costs at its meeting in December, analysts said, after the pace of price rises surged back above the Bank of England’s 2pc target in October.

Inflation rose from 1.7pc in September to 2.3pc last month, according to the Office for National Statistics, mainly as a result of higher energy prices.
However, economists fear the latest data indicates that inflation will rise to about 3pc next year after Rachel Reeves announced hikes to National Insurance and the minimum wage in the Budget.

Andrew Bailey, the Governor of the Bank of England, said on Tuesday that policymakers would be forced to cut interest rates at a "gradual" pace as they assess the impact of the policies.

As a result, traders have reduced bets on interest rate cuts, giving just a 10pc chance of a reduction in December and expecting only about three cuts over the next year.

NIESR associate economist Monica George Michail said: “While we think the Bank of England will continue to cut rates in 2025, the pace of rate cuts is expected to be slower than previously anticipated, and rates may stay elevated for longer".

www.telegraph.co.uk/business/2024/11/20/ftse-100-markets-latest-news-uk-inflation-boe-energy-bills/

Adjacent to mortgage interest rates, could someone please explain why easy access savings accounts are a higher interest rate than fixed savings accounts at the moment? I thought that the point was locking your money away was a did benefit that was compensated by higher interest rates. Why would anyone go for a fixed interest rate savings account if they can get a higher interest rate and access their money instantly? https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Just in case the page is updated I’m attaching a screenshot of the sub heading

Fixed saving rates are lower because there is a belief that rates will fall over the next 1-2 years. Instant access rates are just based on the current situation and have little risk for the banks/building societies.

Telegraph: Mortgage price war erupts ahead of Christmas

Major mortgage lenders are cutting rates as they enter an end-of-year price war to hit sales targets. Natwest, Santander and Barclays lowered rates last week despite expectations the Bank of England will hold its benchmark Bank Rate steady during its final decision of the year on Thursday.

Experts said the trend has been triggered by lenders racing to reach their annual sales goals, with lower rates expected to continue into the New Year.
It comes amid an unusually busy December for the property market as buyers rush to complete on sales ahead of Labour’s stamp duty increase in April.

Santander cut rates by up to 0.23pc across more than 70 mortgage deals while Natwest lowered its two-year and five-year products by up to 0.39pc. Barclays cut rates by up to 0.14pc.

Aaron Strutt at Trinity Financial added: “Rates have been falling in recent weeks and it seems pretty likely that we will get sub-4pc rates in January. The lenders will want to have a busy start to the year and they know they will need to lower rates to tempt borrowers to take their mortgages, especially given the fierce competition between the banks and building societies.
“Two, three and five-year fixes are already edging closer to 4pc which will come as welcome news to those hoping to get on the property ladder.”

Swap rates – the main pricing mechanism for fixed-rate mortgages – have slowly been falling over the past month. The five-year swap rate is now close to 3.8pc with the two-year at around 4.1pc.

www.telegraph.co.uk/money/property/mortgages/mortgage-interest-rate-war-erupts-ahead-christmas/

Meanwhile even asking prices are falling according to Rightmove's own most bullish index, including £10,000 at the top of the market.

https://pbs.twimg.com/media/Ge6r80MX0AAr8_z?format=jpg&name=large

Hard to say how relevant this is at present but the economy is clearly contracting. Even the MSM is admitting that employee numbers are being cut and vacancies have fallen considerably.

You're on the wrong thread ... this one is about mortgage rates.

There is a different thread on house prices.

@Twiglets1 you don't own the threads just because you have started them. Or have you started a new career as a comedian?!

I didn’t say I owned them, just pointed out this one is about mortgage rates & there’s another one devoted to discussing house prices. Up to you if you care or not 🤷🏼‍♀️

Inflation up to 2.6%.

I doubt they will raise rates at the next meeting. But that is to some degree irrelevant to mortgage rates anyway.

Higher for longer trend appears to be continuing...

I think they will almost definitely keep rates the same at the next meeting.

Fed cut today whilst inflation surging higher, no hiding the 2nd inflationary wave from here.

All other currencies will be dive bombing against the $ so if the BoE follows suit and cuts regardless the £ be up the creek without the paddle against the $.

I don't think BoE will cut today, but even if they did then I'm not sure that I'd agree with the hyperbole.

We are nowhere near the parity panic of a year or so ago. And GBP is around a 10 year high against the Euro and near 20 year high against the Yen.

Looks like the bond vigilantes are out in force this morning.

What a tightrope to walk.