Welcome to another week of wonder in our fine industry.
Where to start is the hardest part when reflecting upon the last few weeks since the previous Chancellor’s (yes, previous already), not so “mini” budget some three weeks ago.
In that short space of time, and after all hell broke loose in the markets, we seem finally to be in an atmosphere of calm which we are all grateful for. The markets have been chastened, for now at least, but the cost for this has been the biggest political U-Turn of all time and a fundamental destruction of “Trussenomics” as we know it.
The new Chancellor, Jeremy Hunt, looks very much like the new man in charge with the PM now a sideshow. Almost everything that was announced in the “mini-budget” has been reversed and abandoned, apart from the Stamp Duty changes and the cancelling of the rise to National Insurance.
Even the Energy package has been scaled back to 6 months, in line with Labours policy, and that is still not the end with Mr Hunt looking for further spending cuts. It is remarkable to think that we have a Sunak Government now, without Rishi Sunak.
The markets have thankfully reacted well to all this news, with Gilt yields falling and the Pound rising once more, but some of the damage has left scars that are not easily healed.
We are, however, back in a much better place than we were a week ago, and there are some positives to look for.
As a result of all of these shenanigans, (technical term), SWAP rates have fallen somewhat, with 2-Year money down 0.83%, and 5-year money down 0.41%.
This does not, however, mean that lenders will automatically put their rates down again and it was telling today to see that in the latest announcement from NatWest putting their rates UP this afternoon they mentioned this was due to “current market conditions and recent application volumes.”
This shows that due to the extraordinary numbers of applications lenders have received over the past few weeks they now no longer want to be the top of the Best Buy charts, preferring to price up to give their people time to process the applications through and reset service levels.
As I mentioned in the Financial Times today, I would be cautiously optimistic that the next few weeks will be the peak for fixed rates, staying at the current levels until a few weeks after the next Bank Base rise. After that point we may see some lenders start to think about putting their heads above the parapet again, but only if the markets continue to be calm.
This in itself could also then see a tentative return of more buyers sniffing out a deal as the market moves from a sellers to a buyers’ market. Interestingly I have had a couple of buyers saying they think it is a good time to try to buy now, despite the higher rates that they believe will ease next year.
It really is all about the pipeline at the moment and anyone with an application in, especially with an offer, should be looking to complete as soon as possible.
There really is no guarantee rates will fall, or prices will weaken, but there is a very real risk that those that delay will fall foul of increasing affordability constraints and hence their borrowing power may wane to put them out of their chosen market even with cheaper prices.
A wise head said to me on our new Podcast last week, which you can listen to here, “You make money on property when you buy, not when you sell”.
Never try to play the market, but buy when you need to and is affordable. This is a long-term home, not a short-term plaything and prices will always rise in the long term.
For canny buyers, the next few months may well prove to be a good time to buy.
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 5.64% (5.80% APRC) and 5-year fixes from 5.35%, (5.60% APRC), whilst variable tracker rates are around from 3.00%, (3.30% APRC) and variable discounted rates from 2.49% (5.20% APRC).
Those looking at Buy-To-Let can now obtain products from 2.89%, (5.90% APRC) for a 2-year tracker or 5-year fixes are available from 5.16% (5.50% APRC).