Are we about to see mortgage rates fall even further from lenders as five-year fixes start to edge below the 4.5 per cent figure? Two-year fixes are now under the 5 per cent level for the first time, falling to around the 4.80 per cent level.
That is the question after some much-needed good news for the market last week as annual consumer price index inflation fell to 4.6 per cent, from 6.7 per cent in September, according to the Office for National Statistics (ONS).
This was a slightly bigger fall than expected, mainly driven by energy prices, as there had been an expected fall to 4.8 per cent.
The all-important core inflation, which strips out food, energy, alcohol, and tobacco, fell to 5.7 per cent, from 6.1 per cent, again slightly more than expected.
These latest inflation figures are like a ray of sunshine cutting through the grey Autumn gloom and will be a relief to both policymakers and borrowers alike.
Whilst the Prime Minister is of course trying to claim all the credit, this is a result of both higher interest rates and an expected natural easing of prices generally.
As a result, we have seen SWAP rates fall substantially in recent days as this fall was anticipated, and this set of figures should put paid to any further Bank of England rate rises in the short-term at least.
With one-year SWAP rates at 5.05%, two-year SWAPs at 4.67%, and five-year money now at 4.09%, there is a whole lot of room for lenders to play with rate cuts, which they have already been doing.
One eye will still be fixed on the more stubborn Core inflation, however, showing that we are not quite in the clear just yet.
Lenders are now keen to get a good start to the New Year and battle for market share after a lost year of lending and I expect a continuation of their recent competitive moves, with mortgage rates being cut further as they finally move from a light skirmish to an all-out interest rate war.
Although there are some undoubted challenges still to come, there is a sense of an ending now to the current slow property market. This means that there is a question as to when the optimum time to buy or remortgage is, which of course is the £Million question.
We have always said the best time to buy is when it is right for you to do so, when it is affordable, and the right property is there. It is always difficult to call the market and before you know it, the bottom of the current wave has passed and demand returns and prices start to increase once more. The proverbial boat is then missed.
Although there are plenty of doom-mongers predicting all manner of price falls, once more I believe they are going to be disappointed, and a fall next year of no more than 5%, before a slow recovery again is much more likely than any seismic drop. There is a lot of pent-up demand waiting to be unleashed, which is starting to push at the gates as mortgage rates fall. There is also, of course, the age-old issue of supply of properties, in the areas that many people want to buy in. Add in an election, with both sides wanting to make housing a priority and attract First Time Buyers, and policies to artificially stimulate the market suddenly are also a possibility. WIth all this in mind, 2024 could be the optimum year to buy.
I am not a soothsayer, and whilst I have an Economics degree, it is worth noting it is a Bachelor of Arts. After all, economic predictions are often an art open to interpretation rather than a science! So for what it is worth, I do think the next 12 months could well be a good time to buy before the improving market takes hold. Mortgage rates will get cheaper, but not substantially so in the medium term, with some predictions ranging from only a small to no change in Bank Base Rate next year.
Again, whilst we don’t know what effect the General Election will have, I do believe rate falls will come earlier than expected, partly because the Bank of England has gone too far in raising them, and partly because, the Government would love rates to be down before the election. However, they are not set to decrease massively, and certainly nowhere near the levels we have seen in the previous few years. The new norm looks to be around 4% to 5% for some time.
Either way, getting advice and getting prepared earlier rather than later is a good thing.
For those of you looking to remortgage in the next year, early advice is a good thing. I suspect those of you with rates expiring later in the year than earlier will see a slight improvement, but again, it may only be slight.
The good news is that if you did lock into a rate early, Coreco will continue to monitor the market and if a better product is available to you before completion will let you know. This is something your own bank or mortgage lender will not proactively do.
We are also aware that some of you may well have concerns that your monthly payments will increase dramatically in the new environment. Getting advice early is key here, and we may be able to look at a suitable plan with you to help mitigate at least part of the increases, giving you some important peace of mind and helping you to not pay any more than you really need to.
We have now had the Autumn Statement, and whilst there was not much expected for the Housing industry per se just yet, anyone in Housing or Mortgages expecting an announcement to help kick-start the market will still be disappointed in this damp squib of a budget.
Granted the Chancellors hands are still tied with a lack of funds, and tax cuts of some description were always going to take precedence. The self-employed tax cuts and a cut to National Insurance from 12% to 10%, which will help mortgage affordability for many, as well as some business incentives are to be welcomed, but it is all much of a muchness otherwise.
The change to Permitted Development rules to allow anyone to change their property into two flats as long as the outside remains unaffected is interesting, but in reality, we should not have expected too much on housing this early.
The time for that is when the starting gun for the Election is getting loaded, so maybe the Spring Statement will bring more opportunity. At least this time the tax cuts proposed were agreed upon with the Office for Budget Responsibility and costed!
What is of more interest is the OBR’s predictions on interest rates. They believe the Bank Base Rate will stay higher for longer and will only fall to 4% by 2029. They also believe average mortgage rates will stay around the 5% level, so anyone expecting to wait and suddenly see low rates again could well be disappointed.
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.80% (8.10% APRC) and 5-year fixes from 4.53%, (7.10% APRC), whilst variable discounted rates are around from 5.29%, (7.80% APRC) and variable tracker rates from 5.39% (8.00%).
Those looking at Buy-To-Let can now obtain products from 4.34% (8.30% APRC) for a 2-year fixed, 5.49%, (8.50% APRC) for a 2-year tracker or 5-year fixes are available from 4.49% (7.30% APRC).
If you want to speak to one of our friendly, professional advisers then please contact us here or call us now on 020 7220 5110.
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Great info very useful, thanks!