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/

0.25 is the best you can hope for imo, it won't make a big difference to the actual cost of a mortgage or the amount that can be borrowed. It will though improve sentiment which is important !
I thought we wouldn't see that 0.25 until the end of the year but have shifted my idea. I think there may be room for a small gesture in at the next decision in August.
I'm unsure borrowers will see the full benefit of the cut though. Lenders are competing so hard that some may choose not to pass it on in its entirety for fixed rate product. I'm quite sure it will be immediately knocked off new savings rate product though - we have a situation now where savy investors are making 3% or more over the inflation rate. That's not happened in a long time and must be hurting the bean counters Actuarial bonuses.

Agree that savers will probably feel the 0.25% fall in the base rate immediately - buyers not so much!

As you say though, even a small reduction in the base rate will improve buyer sentiment. A lot of people seem to be waiting for a sign that interest rates have begun the long slow downwards journey to a more palatable base rate of about 4%.

Analysis says it's 50/50 cut or no cut again, Hugh and Haskel now both hinting they won't vote cut. Everyone else on the mpc pretty quiet.
https://uk.finance.yahoo.com/news/hopes-interest-rate-cut-dashed-160730783.html

It’s going to be interesting seeing which way the vote goes on August 1st. Unlike recent months when (like the General Election) we pretty much knew the outcome.

0.25% up or down - interesting? You need to get out more Twiggers. 😂.

I'm more interested in the broad brush picture after a few years - a bit like that u-valley in rates over 15 years.

I think I can find something interesting without it meaning I need to get out more @XVGN

.

Financial Times: Nationwide first big lender to offer sub-4% mortgage deal in months

Nationwide has become the first large lender in months to offer a 5-year mortgage deal at an interest rate below 4%, as lower borrowing costs breathe optimism into the housing market.

The building society said that from Wednesday it would cut the interest rate on a range of loans. Its five-year fixed rate for borrowers with at least a 40% deposit will fall by 0.19 percentage points to 3.99%

Mortgage rates have fallen in recent weeks as markets anticipate the Bank of England will cut its benchmark interest rate in August or September from a 16-year high of 5.25%

The 3.99 per cent rate from Nationwide is currently only available to home buyers, not customers switching from an existing fixed-rate deal, and carries a higher fee of £1,499 fee.

www.ft.com/content/76344ca4-232a-4d5e-997b-2c926e05ee70

Nationwide rates have dropped across other LTV bands, I’ve just checked today. By 0.14-0.29%.

City AM article: City split on Bank of England’s August interest rate decision

City economists are split about whether the Bank of England will choose to start cutting interest rates on Thursday. “The August decision is, perhaps, one of the toughest MPC decisions to forecast…in recent memory,” Michael Brown, senior research strategist at Pepperstone said. Markets put the odds of a rate cut at around 40%.

Deutsche Bank, Goldman Sachs and Nomura were among the forecasters backing an August cut. “The Bank of England faces a tough decision,” analysts at Nomura noted. “But we think it will deliver the first cut of the cycle”.
Sanjay Raja, chief UK economist at Deutsche Bank, agreed that it was a “close call,” but he expected the the Bank to put “stronger reliance on its inflation projections” as well as forward-looking indicators which point to easing price pressures.

However, Capital Economics and Pantheon Macroeconomics both thought that the Bank of England would wait one more meeting before starting to cut rates.
“The economy’s recent strength and the stickiness of services inflation leads us to think that the Bank of England will wait until its September meeting to cut interest rate,” Ruth Gregoy, deputy chief UK economist at Capital Economics said.

https://www.cityam.com/city-split-on-bank-of-englands-august-interest-rate-decision/

Sounds positive 🙏

Bank of England close to cutting rates from 16-year high

LONDON (Reuters) - The Bank of England looks in a position to cut interest rates on Thursday after holding them at a 16-year high of 5.25% for the past year, though markets and economists are far from certain the British central bank will take the plunge.

Economists polled by Reuters last week overwhelmingly expected a quarter-point cut but think the vote will be close on the BoE's Monetary Policy Committee, with only a 5-4 majority in favour.

Late on Wednesday, financial markets were pricing in a 66% chance of a quarter-point cut, and then expected one more quarter-point cut before the end of the year.

"It's certainly going to be a finely balanced decision. You can see that from the market pricing," said Jack Meaning, chief UK economist at Barclays.

Bank of England close to cutting rates from 16-year high (msn.com)

The big news, not speculation, was the FED yesterday HELD the rate.
Considering all the tinkering with inflation figures to show what is politically required, they probably know they don’t have a lid on it just yet.

Where America goes, the rest/west will follow.

Bank of England cuts interest rates for first time in four years

The Bank of England has cut interest rates for the first time in four years in a boost to mortgage borrowers grappling with higher living costs. Policymakers voted by a majority of five votes to four to reduce the Bank Rate from its 16-year high of 5.25% to 5%.

Rate setters had increased borrowing costs to their highest level since the global financial crisis in 2008 in a bid to tackle surging inflation.

The pace of price rises hit a 41-year high of 11.1% in October 2022 but it has been brought back down to the Bank of England’s 2% target, where it has stood for the last two months.

https://www.telegraph.co.uk/business/2024/08/01/ftse-100-markets-latest-shell-next-barclays-interest-rates/

This is Money: What next for fixed rate mortgages?

Mortgage borrowers on fixed term deals should focus less on the base rate decision today, and more about where markets are forecasting the base rate to go in the future. This is because banks change their fixed mortgage rates pre-emptively, on the back of predictions about where the base rate will ultimately be in the future. This is why the cheapest mortgage rates are around 1% below the base rate.

Market interest rate expectations are reflected in swap rates. These swap rates are influenced by long-term market projections for the Bank of England base rate, as well as the wider economy, internal bank targets and competitor pricing.
As of 29 July, two-year swap rates are at 4.26%. The same time last year, they were at 5.49%. Five-year swaps are currently at 3.78%, down from 4.75% 12 months ago.

Prior to the quick-fire base rate rises between December 2021 and August 2023, the lowest mortgage rates have trended above base rate. That was the case at least between 2008 and 2022. This means that even if the base rate settles at between 3 and 4%, we should expect mortgage rates to be higher than that.

www.thisismoney.co.uk/money/mortgageshome/article-13694375/Bank-England-FINALLY-cuts-rates-5-means-mortgages-savings.html

>This is because banks change their fixed mortgage rates pre-emptively, on the back of predictions about where the base rate will ultimately be in the future.

Yup. At the beginning of last week, First Direct gave us 5.24% on a two year fix. Within days she called me and said 'you have 5 days to commit to and pay us the fee this until we put it up to 5.33%.'

Actually benefitting from a base rate drop is a matter of having an absolute hawk eye on lenders.

There has been a surge in lenders reducing their rates by small amounts over the last few days … wonder if they had insider knowledge?? Or were they just going on what they thought was most likely to happen today.

In which specific market? I usually find when they lower rates for one group of people (e.g., home owners), they increase them for another (e.g. buy to let landlords).

Most of the time it's just robbing Peter to pay Paul. They always have the same pot of money, they just move it around between mortgage types.

I've seen a few articles like this one, some of the mortgage rate reductions were announced before the base rate announcement.

www.telegraph.co.uk/money/property/mortgages/three-major-banks-slash-mortgages-bank-of-england-rate-cut/

My phone won’t let me read that without paying them.

Sorry - this is the article

High street lenders including Halifax, NatWest and Santander have dropped their mortgage rates as the Bank of England cut its headline rate to 5%.
Experts now say rates could fall to as low as 3.5pc by early next year.
The Bank of England has held interest rates at 5.25pc for a year, following 14 consecutive rises from December 2021, but made a 0.25 percentage point cut on 1 August.
Halifax announced cuts to its fixed mortgages, taking effect on Thursday, both for homeowners looking to remortgage and those purchasing a property.
NatWest has also cut rates across its fixed mortgage range by up to 0.15 percentage points. The changes apply to both remortgage and purchasing loans.
Similarly, Santander made reductions of up to 0.20 percentage points across its purchase, remortgage and new build mortgages this week. It has also cut the rates on some of its buy-to-let loans.
In light of the decision Coventry Building Society announced a 0.25pc cut to all of its variable rates from 1 September. Likewise, Santander has said all of its tracker mortgage products linked to the base rate, including its standard variable rate, will decrease by 0.25pc from the 3 September.

I just came across this comment on a BBC article, which articulates how I feel about economists better than I ever could:

I'm on absolute tenterhooks waiting for the decision - which way will it go?

My hunch is that it's 50/50, but I think there's only a 1 in 5 chance of that. 60% of the time, I'm right every time.

Do you remember late last year when economists were predicting four interest rate cuts this year?

I know that the original quote was about motorists, but I suspect that 80% of economists consider themselves above average in their skills.

Yes I do but at least those that predicted 4 interest rate cuts this year can claim to be 50% right if there are 2 instead 😉

This is Money: Mortgage cuts continue as HSBC and Barclays reduce rates

HSBC is the third lender to reintroduce a sub-4% five-year fixed deal, following mortgage rate cuts by Nationwide and Natwest in recent days.
HSBC's lowest five-year fixed rate was cut by 0.19 percentage points and currently offers a market leading 3.95 per cent, with a £999 fee.
However, Barclays has also announced that from tomorrow, it is cutting its lowest five-year fixed deal from 4.04 per cent to 3.84 per cent.

Mortgage brokers expect more big lenders will follow Barclays and HSBC over the coming days or weeks. This is in part down to lenders competing for new business in order to keep on track and hit annual targets.

However, it is also driven by the money markets and expectations around the future of interest rates. These expectations are reflected in Sonia swap rates. Mortgage lenders enter into these agreements to shield themselves against the interest rate risk involved with lending fixed rate mortgages.
Put more simply, swap rates show what financial institutions think the future holds concerning interest rates.

As of Monday, five-year swaps were at 3.57% and two-year swaps were at 4%.This is down from 3.89% and 4.4% respectively at the start of last month and down from 4.73% and 5.41% a year ago.

https://www.thisismoney.co.uk/money/mortgageshome/article-13718131/Mortgage-cuts-continue-HSBC-Barclays-reduce-rates.html