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/

https://uk.finance.yahoo.com/news/mortgage-interest-rates-latest-barclays-hsbc-natwest-halifax-151133798.html

The media do like their dramatic headlines @DrySherry but these lenders aren’t raising their rates by much. As mentioned elsewhere it’s all linked to the uncertainty over when exactly the BoE will make the first cut in their base rate. Will it be June, will it be August or could it even be later on in the year? That is the question.

Yes, but it could equally also be no base rate cut at all, or one so small it makes no difference. Add to that the swap rates situation and if that continues mortgage lending could easily get more expensive this year. It could go either way imo.

"We are now seeing the spike in Swap rates last week, filtering through to the public as lenders raise their rates in response."

I don’t agree it could equally be no base rate cut at all @DrySherry as so many reputable economists/analysts are expecting the next move to be downwards and starting from a certain point in 2024. The exact month it falls is debatable of course and has generally shifted to later in the year. What you don’t hear many of the professionals saying is that the base rate won’t fall at all.

Im not saying it’s impossible for them all to be wrong as no one can predict the future with 100% certainty. But it’s not like a 50/50 situation in my opinion.

I agree with you that my opinion is in a minority, a fairly substantial minority non the less. I do tend to have a very open ear to Jonathan Haskel. I think he may be right about the issues of wage growth and about persistent underlying inflation. I'm hedging my bets still on this one.

The Americans are now saying no rate cuts in 2024. Where America leads, the UK follows. This is now the new normal.

I get your reasoning Twiglets, that no professional is saying (yet) that there won’t be a cut. I personally don’t think that’s a good enough reason not to wait, I’m remembering when everyone said don’t fix energy prices in 2022 as there’s no benefit and then they went up even more. All the professionals caveat their advice, that they don’t have a crystal ball etc and are going by available numbers and what financial organisations say.

By all means wait @MortgageMama if you’re in a position to do so why not wait until the base rate actually does fall ( assuming it does)

I have a few months window to fix before SVR so can’t wait for late in the year, I used a double negative, sorry for the confusion! So I don’t want to wait another 2 months and they’ve gone up even more. I’m also interested in trends over the 2 to 10 year window. I’ve started seriously thinking of fixing for 10 years at below 5% which is something I would never have done before as I would have expected wages to at least follow mortgage trend, but with House Price Index going down, CoL in nursery fees (I’m very hesitant about nursery fees after the funding for 9 month olds comes in September 2025), council tax, energy and food, that’s no guarantee. I’ve been lucky and able to absorb the increases of the last 2 years but if we’re in for another cycle of it, that may not be the case.

I would really be reluctant to fix for 10 years personally although I can understand the desire to fix for 5 years rather than 2 or 3 to get past the most expensive childcare years knowing that you can afford the mortgage repayments.

10 years is so long though! Quite apart from the direction of travel of interest rates being expected to go downwards by the experts (because they can be wrong as you point out) what about if you wanted to move in that time? Sure you could port the mortgage but then you would be restricted to just that one lender. This is something that would concern me but to be transparent, we have moved a lot for my husband’s job. If you feel that you are very likely not to want to move house in the next 10 years then that factor wouldn’t matter to you.

Have you tried The Mortgage Works? I've always found their btl prices are lower than others.

I think you are right to be concerned. I think it's likely that The Fed will cut this year despite inflation being extremely sticky. The most likely scenario would be at least one pre election cut in September but they could cut in July too. There is no guarantee that it would lead to reduced mortgage rates though. They would obviously cut a lot more drastically if things are going v wrong economically by then. The likelihood is that they wouldn't admit this until post election though unless unavoidable (same as the UK, with a ridiculous positive spin being put on everything).
Like you, I think we are v likely to see a lot more inflation in the next few years, likely considerably more. If I were in your situation with v young children and v high childcare costs, I would be looking to fix long term for certainty. The goldilocks scenarios that some people are hoping for are not going to happen.

I think if you have an opportunity to fix now it's a good idea not to wait. In 2 months time I expect mortgage rates will be a little higher than now.
The big lenders have all been competing to lend with a view that the base rate would get a first cut in June. That now looks quite unlikely so they will need to readjust to it and will claw back margins in the short term. I don't expect it will be lots higher, but seriously doubt they will be lower within your time frame.

Totally agree, 10 years is a very long time @Twiglets1 ! My life plans are 10 years at the moment, 1 in nursery, 1 expecting and I’d like another, so that’s why I am starting to consider it may be appropriate to fix for that time. If Something Bad happens, or things need to change, I can manage and respond to that, I don’t think you can plan for a disaster. I think a change in mortgage is more likely to instigate the need for lifestyle plan change, I.e. no longer able to afford nursery or another mat leave if rates go up in 5 years.

I’m more worried about the HPI changing a lot, it was below 75% LTV for me in August and now above. Even if mortgage rates don’t change that much, if house prices keep stagnating, the mortgage products offered to me may not be as favourable in 2 or 5 years time.

Fair enough @MortgageMama you must do whatever makes you feel more comfortable. It’s not an easy decision and we will only know in hindsight what the “right” decision would have been financially speaking.

I’ve sometimes been right and sometimes wrong with mortgage decisions and both have seemed quite random and outside of my control. In other words, there’s a large element of luck in whatever we do.

Yes it’s all good looking at trends, but depends what you’re offered at the time. In 2022, I was offered a 2 year fix at 1.5%, a 3 year fix at 3%, 5 year fix at a bit more and the 10 year fix was over 5% going on 6%. I’m glad I chose the 2 year even with the rises because my mortgage debt would have grown a lot more. What I’m being offered now there’s a difference of 0.24% going the other way, so 5.2% for a 2 year fix, and 4.96% for a 10 year fix. If it was similar differences to 2022, I’d still go for the 2 year.

Some of the TSB increases announced today are a bit alarming !
https://inews.co.uk/inews-lifestyle/money/property-and-mortgages/halifax-among-major-banks-increasing-mortgage-rates-3022594?ico=related_article_inline

This from Sky News 7 hours ago.

Widely reported in the media that several lenders have raised their fixed rate mortgage deals as a result of what the Guardian calls "market uncertainty". They note that figures released last week showing a smaller than expected drop in inflation in March caused some economists to push back their forecasts for when the Bank starts to cut interest rates. City investors are pricing in two rate cuts by the end of the year.

Nicholas Mendes, mortgage technical manager at the broker John Charcol, said lenders had “adjusted their positions in response to market uncertainty”, although he added that borrowers “are unlikely to experience the same level of volatility and high rates as last year”.

Moneyfacts, the financial data provider, said on Tuesday that the average rate on a new fixed-rate deal lasting for two years had nudged up slightly to 5.83% – up from 5.8% at the start of this month. Meanwhile, the typical rate on a new five-year fix stands at 5.4% – up from 5.38% at the beginning of April.
However, the cheapest two- and five-year “best-buy” fixes were this week priced at 4.46% and 4.13%, respectively.

https://www.theguardian.com/money/2024/apr/23/leading-uk-lenders-raise-fixed-rate-mortgage-deals-amid-market-uncertainty

Think the talk about the interest rate is rather meaningless as virtually all mortgages here have a teaser introductory rate which then reverts to a higher one.

It might be more meaningful to track the SVR as that's immune from manipulation.

For instance any bank wanting a piece of the action could just drop their 'teaser' rate to below everyone else's while keeping the SVR the same.

Or have a low teaser rate while bulking it out with higher fees.

Therefore the rate is illusory, but it just preys on the dumbness of the average punter/media who only sees the rate and runs conclusions based on that.

I don't agree with that because in the UK most people switch to a new fixed rate mortgage as their current one comes to an end so effectively they never do go onto the standard variable rate (SVR).

Though I do agree that some lenders advertise lower rates to bring in new business but charge higher fees to set them up, so people might be better off switching to a higher rate but lower fee deal. It's important to always check the set up fees payable and take that into account rather than just pick whichever lender is offering the lowest rate.

Very few people pay SVR but it is a measure which is free from doctoring as it's not affected by other factors like LTV, fees.

Even though few people pay it the spread between SVR and interest rate is a good indicator of what their sentiment is, and you would look at this as aggregate across a wide range of banks. That's better and more meaningful data.

An example, if for some reason a bank brought out a 4% mortgage, it'd be on the news and this thread before anyone mentioned it's be 50% LTV, not on flats, £2k arrangement fees, 2-year fix, so the 4% becomes quite irrelevant.

A mortgage introductory rate on its own is not strictly comparable, but an SVR is.

I kind of get the discussion; there were a load of doom-mongers predicting double digit interest rates, wetting their pants at anything that hints at drifting higher, and that's stupid. But it also seems to have caused an equal stupid in the other direction, pant-wetting at any hint of things drifting lower.

I’m looking to remortgage and have been offered 4.4% on a 5 year fix which I don’t think is too bad! (Had the call with mortgage advisor yesterday). Certainly more than my last fix at 1.4%.. but also not as bad as I was dreading! Think there’s a lot of scaremongering about mortgages at the moment.

It relative, what maybe not much to you on a higher equity basis with a low mortgage on a property bought decades ago, will be something else entirely buying a two bed in the south east at £500k in 2021. A rise from 1.4% to 4.4% would be a dealbreaker on a typical income of that size of mortgage.

But like I’ve said on this thread since last year when all this talk of June rate cuts begun. I said there would be a January ‘window’ in which banks would fight against each other with lower rate mortgage offers but then they would be rising not falling when inflation remains sticky and possibly rising in a second wave.

If the central banks cut it will not be for economic reasons rather political and the markets most likely will react badly as inflation has not been dealt with. Thats means the swap rates and mortgage rates may not follow suit.

https://moneyweek.com/personal-finance/mortgages/latest-UK-mortgage-rates

@Lightscribe I do appreciate that it’ll be tough for some people, I’m not trying to minimise this and you’re completely right - it’s all relative.

All I was trying to say was when rates were in the mid 1’s - we were in a pandemic and surely people should have expected them to rise? It’s certainly not the 17% that my parents had to pay.