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/

Interest rates are fine where they are. Inflation is sticking/normal. The BoE should sit tight.

I think they should hold, because no one really knows what is going to happen when Trump gets in.

But they will probably cut because the markets expect it, and they hate to disappoint. Or more accurately they are petrified of doing something contrary to market expectations.

The longer time goes on, the more irrelevant the BOE gets.

The best thing about the inflation rate today is that it appears to be stable. Its only one month but stability seems better than shock movements which either way seem to spook someone.

My gut if suddenly higher is "oh no", remarkably lower is "yeah right, someone had Friday as leave, just wait until it catches up next month!"

I totally agree.

https://www.bbc.co.uk/news/articles/c8r5jkv5g5po

My gut feeling is that the economy is fragile but could be (much) worse.

There’s that 0.1% again. You know the country is in the shit when 0.1% makes the headlines.
0.1% is one thousandth of 100%

It's when it's described as "growth" it makes it a bit of a joke.

We are basically flat lining. 0.1% could easily be revised out in later figures.

I am waiting for the time when they start calling it a "technical recession" rather than just a recession because of the small negative values.

Yes, worse than fragile with the amount of debt in the system (government and private), chronic trade account deficit due to not making/ selling things for decades, low incomes for the majority, large proportion of population not working, worsening demographics.
Growth is just a buzz word that they like to use rather than something that will actually happen. Even in the US, the 'growth' wouldn't happen at all without the massive debt, which is increasing much more rapidly than their GDP.

A very convenient +0.1%.

Still it's not a shocker rate.

Don't shoot the messenger but according to the Telegraph today, the FTSE 100 hit a new record high as traders ramped up bets on interest rate cuts after retail sales declined unexpectedly in the face of Rachel Reeves’s £40bn tax raid.

Money markets indicate there is a 92% chance of a rate cut in February, with a second cut expected by August.

www.telegraph.co.uk/business/2025/01/17/ftse-100-markets-latest-news-retail-sales-christmas-reeves/

It's less about shooting the messenger than the fact that the message is largely irrelevant.

Gilt yields have eased somewhat in the last few days but are still somewhat above (0.1%) where they were beginning of Jan. That might starve off some mortgage rate rises that were expected if the rises since the 1st Jan became consolidated in the gilts market.

Otherwise the BOE can lower all it wants. The international money market demands the price of money that it wants. Not what the BOE dictates to it. The BOE IMO puts a floor under the price of money.

Disagree that the BoE potentially lowering its base rate several times throughout 2025 would be irrelevant to future mortgage rates.

https://inews.co.uk/inews-lifestyle/money/property-and-mortgages/hsbc-among-mortgage-lenders-increase-rates-3483781

You’re right they are not completely irrelevant that’s why the banks are now raising their rates further.

The IMF have backed Reeves by announcing their positive growth prediction for the UK in 2025.

Trouble is the gilt markets don’t believe Reeves or the IMF and the treasury yields are intrinsically linked to swap rates.

As you can see on the yield chart below, yields are still higher than when we had the ‘panic’ over the Truss mini budget.

BoE will follow the Fed. Trump doesn’t like high interest rates and although he doesn’t control the Fed, they’ll want to spend on infrastructure (Greenland etc) to become resource independent from Russia/China etc. That means they’ll return to QE at some point.

So rates ‘may’ be cut even though yields remain high, which is highly inflationary so higher yields in the long run and will lead to stagflation.

What that also means mortgages won’t be following the BoE with cuts as swap rates will stay higher too, unless we have a recession, stock and real estate correction and deflation where yields drop like a stone like China has had.

https://www.thisismoney.co.uk/money/mortgageshome/article-14292577/amp/Four-major-mortgage-lenders-increase-rates-time-Heres-follow.html

as the previous article was behind a paywall

Lenders raising their rates now as a result of economic uncertainty does not change my belief that if the BoE lowers its base rate several times throughout 2025 that will have an impact on future mortgage rates (downwards).

'So rates ‘may’ be cut even though yields remain high, which is highly inflationary so higher yields in the long run and will lead to stagflation.
What that also means mortgages won’t be following the BoE with cuts as swap rates will stay higher too, unless we have a recession, stock and real estate correction and deflation where yields drop like a stone like China has had.'

This summarises my view well. I don't think we've seen the last of the problems in China. As I've said before, I personally do think we get that recession in the UK but longer term stagflation, although it could just be stagflation. The responses- QE on steroids, etc will tend to make stagflation even worse or cause hyperinflation and currency destruction/ collapse in the end. Obviously, no one knows exactly what happens and when but these things look pretty likely.

@Twiglets1 the banks are not raising rates in response to 'economic uncertainty'! At present, as @Lightscribe and others have said, markets do not trust what the authorities are saying in terms of projections and are therefore demanding higher rates on borrowing.

When my DD bought her house end of 2023 early 2024, when BOE rates dropped so did the mortgage rate. Her broker was watching their mortgage agreement with a keen eye and then he did something close to exchange that put them on a slightly different rate with the same lender and saved £35 a month.

A year on, my DS agreed a rate in Autumn 2024 and its been completely different! The BOE rate has fallen so his sister asked him to check with the broker (same one my daughter used) for lower rates.....no way can they even touch his 3.69%.

So it's very clear the mortgage market is not driven entirely by the BOE.

Let's hope they manage to complete before that expires!

Just down sizing to a 3 bed, hoping to complete and Move in Feb. Forced to sell due to a relationship end and my 2% coming to end in October. My mortgage payments go to £2k in Oct and as the sole provider I just cannot afford to stay. Placeholding on this thread as i'm porting my 2% until i need to remortgage in October which i've budgeted to be around 4%, but now i'm a bit concerned it may be more.

I don’t think the mortgage market is driven entirely by the BoE @Feelingstrange2 but do think they are connected. Hope your son manages to keep the 3.69% rate which certainly looks much better than anything I’ve seen advertised recently.

Bank of England interest rates warning as several cuts expected

The Bank of England is expected to cut interest rates next week - sparking a series of reductions in 2025.

Markets are pricing in an 84% chance of a cut as policymakers respond to slowing economic growth and a dip in inflation. Some finance experts, including a new member of the Bank of England's Monetary Policy Committee (MPC), suggests this could be the first of five or six quarter point cuts over the next 12 months to head off a recession.

While a rate cut may bring some relief to borrowers, experts are warning that it could also put pressure on savings rates, with further cuts likely to be gradual and cautious due to rising prices and job losses.

Homeowners hoping for immediate savings on mortgage payments may be disappointed. Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "A rate cut has been on the cards ever since inflation fell in December, but it won’t be a game-changer overnight.

"Fixed-rate mortgage holders won’t see any sudden drop, as the market has already priced this in. The average two-year fixed mortgage has actually crept up slightly, from 5.48% to 5.52% this year."

However, she added that as long as inflation remains under control, rates should trend downwards over time, which could ease financial pressures on millions of mortgage holders.

https://www.express.co.uk/finance/personalfinance/2008275/bank-england-set-cut-interest-rates

Three banks drop mortgage rates: Will more follow if interest rates are cut?

Halifax has cut rates by up to 0.3 percentage points on remortgage deals, while home movers and first time buyers will see rate reductions of up to 0.11 percentage points. Andrew Montlake, managing director at mortgage broker Coreco told the news agency Newspage: 'Where the Halifax goes other lenders tend to follow, so these cuts could trigger a chain reaction.
'The markets have baked in a rate cut on Thursday.'

Halifax is now offering one of the cheapest five-year fixed rates for those remortgaging with at least 40% equity in their homes. Its 4.18% five-year fix comes with a £999 fee. On a £200,000 mortgage being repaid over 25 years that would equate to £1,076 a month. For those needing a mortgage to cover 75% of their home's value, Halifax is offering a 4.36% rate, also with a £999 fee.

Hot on the heels of Halifax, HSBC and Clydesdale Bank have also announced rate cuts. Clydesdale's cuts, which took effect from today, saw a number of its two-year and five-year fixed rate mortgage deals lowered by up to 0.28 percentage points.

The latest swathe of rate cuts follows Barclays and Coventry Building Society, which both announced similar changes on Monday. Jack Tutton, director at SJ Mortgages thinks that the latest cuts could be a further sign that the Bank of England will vote to reduce the base rate tomorrow. He also points out that Sonia swaps - the bank lending rates which influence the pricing of fixed rate mortgages - have fallen in recent weeks.

https://www.thisismoney.co.uk/money/mortgageshome/article-14363425/Three-banks-drop-mortgage-rates-follow-rates-cut.html

Pound plunges as Bank of England cuts rates – and hints at more to come

The value of the pound has sunk sharply as the Bank of England signalled there would be more interest rate cuts later this year. Sterling dropped 1.1% to $1.237 after policymakers cut interest rates to 4.5% in a surprise vote that saw two members vote for even steeper reductions.

The Governor of the Bank of England, Andrew Bailey, is holding a press conference after the Monetary Policy Committee (MPC) voted 7-2 to cut rates as it slashed its growth forecast for 2025 in half.

Officials warned that there were increasing signs that Rachel Reeves’s record tax raid was dragging on the economy, which is predicted to barely avoid falling into recession.

Two MPC members, Catherine Mann and Swati Dhingra, called for a bigger rate cut of half a percentage point to 4.25%, as they warned there were signs that the economy was slowing faster than expected.

Traders have ramped up bets on further interest rate cuts, favouring another three reductions by the end of the year. Bank staff now believe the economy will expand by just 0.75% this year, down from a projection of 1.5% just three months ago.

Its latest economic forecasts warned of a stagnating economy, higher inflation and rising unemployment against the backdrop of a £40bn tax raid that will hit low-paid workers hardest.

https://www.telegraph.co.uk/business/2025/02/06/interest-rates-bank-of-england-ftse-100-markets-latest-news/

How do we find out the breakdown of true growth versus immigration/population led growth?

No idea

Mmmmmmm

I smell and smell and its very rat like!