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/

I think they will get @HellsBalls. Even if they don't in May, they will later in the year.

It's on a knife-edge and I have no idea which way it will go. Lower rates as the risk of recession increases or increased rates as the risk of inflation increases.

This is exactly why I operate a diversified portfolio that should smooth out the upcoming volatility.

Personally speaking, whilst acknowledging a lot of pain in the pipeline for many people, these are the times that the rich get richer. It may even be suggested that Trump engineered it exactly for this purpose. We all know that WB bailed out of many holdings in the recent weeks and months. We know that he'll be getting greedy as everyone becomes fearful.

And I know why you think that. This was always going to go into one of two options:

1. Deflation - spiral into recession

2. Inflation embedded - stagflation

Currently we are going down the first path, but other countries have a lot of US debt they can offload which will keep rates bouncing back (as attached).

Crashing the stock market only works when the world is buying each others debt (rush to treasuries lowering yields) not when countries are turning inwards in an inflation cycle.

So that’s why I said for many years on here that I don’t believe any rate cuts will be realised into the consumer end of the market by way of mortgage rate reductions. But rather in a recession there will be a restriction of credit supply even if central rates are lowered which won’t be reflected at the consumer end as the banks and hedge funds will be covering risk/losses.

This is not the ‘soft landing’ that I’ve emphasised many times on here, it’s a ‘hard landing’ which means inflation will return so rates will have to rise again higher at a later point as the cost of everything goes up and we enter stagflation (recession and high inflation)

US 10 year

You could be right @Lightscribe. It would certainly be natural for lenders to restrict credit during a chaotic time in the financial markets.
I definitely think we will see option 2 in the longer term. They won't be able to resist 'printing'.
Whatever happens, I think we both agree that it won't be good.

QE again?

that fucked things up

I think more QE or QE by another name is pretty much guaranteed once things start to look really bad, perhaps at the end of the year. I think it will more than f**k things up this time. I think there would be a huge risk of severe inflation and perhaps a currency destruction. I don't think QE can work forever. I do think that the US has some kind of plans for a currency reset, but what that is, I have no idea.

how depressing

I never know what'll happen but I have heard commentary (could be Ray Dalio or David Hunter "Watch and learn") suggesting a final round of QE on steroids that will send markets to the moon before a final reckoning on debt unlike anything anybody can imagine.

Please no, that would be desperate and damaging exactly like last time. I have no idea what will happen but short term I think an increase in inflation will mean no interest rate cuts, possibly in fact increases.

Oh @DrySherry you always think that ( increases in UK interest rate) & you’re always wrong. Sorry but I’ve seen you say it time & time again.

I agree! Hopefully I am wrong.
They have already been increasing liquidity by different methods while doing QT so the markets have done extremely well. I think the Democrats were hoping his and all the handouts and turning a blind eye to fraud would give the impression of a great economy and get Biden reelected. Obviously, ordinary Americans disagreed that the economy was great despite all those things!

Former deputy governor of Bank of England is recommending they cut base rate by 0.5%

She/he will probably be right at some point. I think cuts are nearly certain in the shorter term.

Yes they will probably be right at some point but only in a stopped clock fashion.

(sorry @DrySherry I just don’t understand your obsession with always expecting interest rates to rise even when they very clearly are going in the opposite direction at the time ).

Yes, It's a bit of a personality flaw, I always plan for worst case scenarios to the point that I start to expect them. Has held me back in life at times no doubt about that.
On the other hand I'm always prepared and rarely unpleasantly suprised.

Thank you for your explanation @DrySherry

I don’t see it as a character flaw just you are a bit over cautious. But as you say,
that means you’re always prepared for the worst while people like me are more likely to be caught out 🤷🏼‍♀️

Perhaps. She/he seems to have responded explaining that her comments are related to anxiety rather than what she is observing economically so it sounds as if you're correct. I think that's what you meant @DrySherry.

Does anyone think the gov will bring in/change property taxes in the autumn?

Nope. They don't have the will and/or skill to do that.

hopefully not increased income tax then 😣

https://www.cnbc.com/2025/04/08/mortgage-rates-higher-tariff-uncertainty.html

Because it’s not as cut and dried as you think.

They are rate cut expectations. Yields have indeed dropped only because the stock market is crashing causing a flight to safety.

This isn’t the ‘soft landing’ the BoE had in mind when those predictions were set out.

Lots of opposing forces in play at the moment with countries like China dumping western debt which causes yields to rise.

Mortgages are now rising again in the US because of this. Our yields are following.

Tariffs are inflationary longer term. Inflation is also still embedded in the system (pay rstrikes, bills rising etc). In a recession this means stagflation like the 70s.

Even if they lower short term they would have to rise again once the secondary wave of inflation hits.

https://www.cnbc.com/2025/04/08/morgan-stanley-says-fed-wont-cut-rates-until-next-year-thanks-to-tariffs.html

Expectations change as outlined above

'Even if they lower short term they would have to rise again once the secondary wave of inflation hits.'

I agree with you here @Lightscribe