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/

The Inflation trend in the UK is downwards. 3.4 in February and 3.2 in March. April's figure will come out soon but is likely to be lower because the fuel price cap went lower from the beginning of April. Growth is also going up at 0.6 so we are out of recession. I think BoE will be reduced by a measly 0.25 to 5.0 percent in June provided inflation is 3 percent or less by the June BoE meeting.

Ah the rates may drop rhetoric. This has been touted for months now and is wearing thin for me.

As someone trying to sell a house (sold twice but one couldn't get a mortgage despite a DIP due to rates making it unaffordable and the other one 'not feeling it anymore' on exchange day to move halfway across the country buyers appear to be waiting for this magical decrease in base rate.

I get that the base rate will remain high and I'm a realist that rates are to stay which is fine by me but all this will they wont they is having very real impacts on people.

Rant over

I agree about the inflation trend and that we are out of recession.

I also think the BoE rate will be reduced by 0.25% but wouldn't like to guess whether that will be in June or August. Then at least one more 0.25% rate reduction later in the year.

The headline inflation figure is going to look very good when published on 22nd May. There will be a clamour for an interest rate drop.
However, below the surface, wages are rising too quickly (6%) without the necessary productivity gains and the economy is doing better than anyone expected (GDP +0.6% latest quarter). This is not the backdrop for interest rate reductions and if I was Bailey, I wouldn’t drop them.

"This is not the backdrop for interest rate reductions and if I was Bailey, I wouldn’t drop them"

I have to agree, we are nowhere near them being able to drop. The chances of a rise are at least faded for the time being though.

Reuters Poll Bank of England to cut rates in August but June a very close call

The Bank of England will start bringing down interest rates in August, according to a slim majority of economists polled by Reuters, while only slightly fewer of them predicted a rate cut next month.

In the May 13-16 poll, just over half of economists, or 38 of 71, predicted the first rate cut to 5.00% would come in August. Thirty-one opted for June, a slightly smaller proportion of the sample than in an April poll, while two said September.

Gilt-edged market makers (GEMMs) were almost evenly split on the timing of the first cut. Of 15 GEMMs who participated, eight said June while seven said August. Financial markets are pricing two rate cuts this year, starting in June.

Bank of England to cut rates in August but June a very close call: Reuters poll (msn.com)

This is Money: Barclays and HSBC cut mortgage rates: Is the tide turning?

From tomorrow, HSBC and Barclays will slash rates across various fixed mortgage products aimed at buyers and people remortgaging.

Average mortgage rates have steadily increased since the start of February, with most mainstream lenders raising them several times - and mortgage brokers say today's announcements could mark a change in direction.

Since February the cheapest five-year fixes have gone from below 4% to close to 4.5% and the cheapest two-year fixes have risen from around 4.2% to 4.8%.

While HSBC won't reveal the detail of its rate changes until tomorrow, Barclays has said that it will introduce some of the market's cheapest five-year fixes.
Its lowest five-year fix for people remortgaging, is falling from 4.77% to 4.32%, with a £999 fee. Unless HSBC beats it, that will be a new best buy.

This rate will be available to people remortgaging where their mortgage amount equates to no more than 60% of the property's value. Barclays is also cutting rates for those remortgaging with at least a 75 per cent loan-to-value ratio. This is dropping from 4.84% to 4.45% and again will be a best buy.

The lender is also slashing its lowest rates for home buyers who have least a 40% deposit, from 4.47% to 4.34%. These have an £899 fee. Home buyers with a 25% deposit could be able to secure a rate with the bank at 4.44%, down from 4.73%.

https://www.thisismoney.co.uk/money/mortgageshome/article-13425557/Barclays-HSBC-cut-mortgage-rates-tide-turning.html

4.47% to 4.34%. Slash? Some kind of vocab failure?

lol - they always do that whether rates are going up or down

Do they though? I thought they "inched" up. I must have missed a "rocket up" somewhere! (No comments)

Lenders “hike” interest rates on the way up and “slash” them on the way down according to the media.

See an article posted by Dry Sherry last month on this thread (don’t know how to copy & paste it on my phone)

BBC article: UK inflation falls to 2.3% as energy prices cool

1. UK inflation has fallen to 2.3% - just above the target of 2% - the lowest level in almost three years
2. It means prices are still rising, just at a slower rate
3. Energy prices are at the heart of the falling inflation rate, as they fell by 27.1% in the year to April
4. "Today marks a major moment for the economy, with inflation back to normal," says Rishi Sunak
5. Inflation was running at 3.2% in the year to March 2024 - that was the lowest rate since September 2021
6. Falling inflation is expected to lead to a cut in interest rates later this year
7. Back in October 2022, inflation peaked at 11.1% - its highest for 40 years

https://www.bbc.co.uk/news/live/business-69027403

Analysis by the BBCs economics editor, Faisal Islam:

"Today's inflation figures do not decisively point to an interest rate cut in June.
While the fall of the headline rate of inflation to 2.3% was welcome, the inflation seen in the services sector remained higher than expectations, with only a marginal fall to 5.9%.
This measure is a better indicator of how persistent or sticky inflation will be in the coming months.
It shows how much the inflationary bug, which started in energy, has now spread to other prices and wages.
April saw high inflation pass on to other sectors of the economy through inflationary rises in mobile and broadband bills.
The impact of the national living wage rises is another important factor. All of which will leave June’s decision on whether to cut on a knife edge.
There are new figures for inflation and wages before that decision. While the direction of travel is now clearly downwards, the Bank cannot yet declare the inflationary fires out".

Money markets have June cut at 15% chance and August at 40% now. I suggest the economy is stronger than expected.

That's interesting ... I've not been able to find the markets new prediction for August. Please could you provide a link?

Again Twiggy you’re cherry picking a BBC article (with London based journalists with a vested interest in lower rates) interpretation of the CPI figures.

Look at every single other media article on it and you will see that the rate of inflation come down less than expected which will dent any hopes of June rate decrease.

Fact of the matter is the US rates isn’t going anywhere and as much as the BoE want to cut they can’t. (See 10 year gilt spike today)

https://x.com/investingcom/status/1792903971339727147?s=46

The only cherry picking I did was to pick an article that was not too hyperbolic in their headline unlike "inflation tumbles to lowest level since 2021" (Telegraph) as I know that upsets @XVGN

I don't know why London based journalists would have a particularly vested interest in lower rates? Is that something you can explain?

Apparently the markets are currently suggesting a 15% chance of a June decrease so not all hopes are dented, for those hoping for a decrease. And a 40% chance in August, according to @Lastwhisper so it's a bit too soon to assume (as you seem to be doing) that we won't see a UK base cut this summer.

The 40% chance of an August cut was discussed on CNBC this morning, down from 70%.
It is perhaps that demand is picking up. This is good news of course on the whole.

We might, just might, get one small (0.25%) cut by the end of the summer then. Oh dear.
I see that the most important inflation measure (core) is still at double the BOE target too.
Not looking good for lower rates this year.

I bet the BOE are desperate to cut but a move before The Fed is risky. The Fed is pretty stuck too but I'm pretty sure they will cut at some point in 2024 as the US economy deteriorates more obviously later this year.
https://finance.yahoo.com/news/no-soft-landing-us-economy-022146984.html

"Traders now expect the Bank to start cutting interest rates as late as November, after previously expecting a 50pc chance of a June move."

https://uk.finance.yahoo.com/news/inflation-tumbles-lowest-level-since-071537157.html

The cynic in me also thinks that the reason Sunak has called an election for 6 weeks time - is that he knows that now is the best it's going to be in terms of being able to claim to have beaten inflation !
He knows the expected summer/autum rate cuts are not coming, now is his best chance before reality dawns.

I agree. Energy prices have forced a drop in inflation, that won't sustain over the coming months.

Also there is a shit show coming, in terms of record levels of boats, prison capacity at the limit so police are told not to arrest anyone. Later in the year there is a shit show coming.

I don’t think Sunak has called the election now because of inflation - which is the one area he can claim some success, albeit it’s not really down to his policies. The signs are still pointing to inflation falling further later in 2024 which if anything would have given him a reason to delay the announcement.

But I do agree there is a shit show coming down the line in lots of other areas including illegal immigration, not being able to afford the promised tax cuts in the autumn etc.

I think maybe he just got sick of it all. Had to laugh at his speech in the rain yesterday with “things can only get better” playing in the background.

I see swap rates have risen sharply since the election announcement. That's probably going to feed in to increased mortgage rates quite quickly.