To cut or not to cut interest rates…

It has been interesting to see the shifts in interest rate expectations over the past few months, going from there will definitely be another cut this year to maybe not.

There is so much conflicting data around, and up until today, SWAP rates seemed to be lethargic at best, with little or no momentum and all looked to be converging on a plateau.

One, two-, three-, five- and seven-year money all converged on the 3.7% rate, which sent a pretty stark message that the markets, at least, believe there will only be one more rate cut, most likely towards the end of Q1 next year to 3.75%.

After that, all bets are off, but as it stands, that could then be the prevailing rate for the rest of 2026, with possibly one more cut before it reaches the long-term level at 3.5%.

However, today’s data changed this slightly with news that wage growth had cooled and unemployment also increased slightly. This allowed SWAPs to finally ease down a little more, but whether this is enough to put a November cut back on the cards remains to be seen. On balance, I still think not, although going into the budget, I do think they should.

Of course, all this precludes the appearance of yet another swan flying in dressed in a deeper shade of black, but those borrowers sitting waiting for more acute rate cuts could be waiting a very long time, whilst house prices look set to increase again next year. In fact, the latest predictions from Savills suggest that house prices could be up by around 24% over the next five years.

Slightly cheaper rates vs higher house prices?

The biggest mover of rates now is lender competition, which will, as always, get fiercer as lenders look for a good start to the New Year. We have plenty of options starting with a 3, which is great, and with more innovation and positive criteria and affordability changes from lenders, there is choice.

The issue for the market, of course, is the late Budget set for 26 November, as there’s not a lot of wiggle room for movers before everything grinds to a mince-pie-fuelled halt.

With a long lead time, the rumour mill will move into full effect, with every week uncovering another proposal that may, or more likely may not, happen. Scaremongering by certain sections of the press and certainly politicians to the right will be fierce.

If the Budget isn’t as bad for the property market as some expect, demand could pick up sharply and asking prices could rise again, putting sellers back in the driving seat in the new year.

It’s all to play for, but there is, as ever, a market.

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 3.75% (6.70% APRC) and 5-year fixes from 3.94%, (5.50% APRC), whilst variable discounted rates are around from 4.14%, 7.30% APRC) and variable tracker rates from 4.11% (7.10%).

Those looking at Buy-To-Let can now obtain products from 2.74% (7.50% APRC) for a 2-Year fixed, 4.27%, (7.30% APRC) for a 2-year tracker or 5-year fixes are available from 3.69% (6.80% APRC).

Contact

To speak to one of our friendly, down-to-earth advisers, please call us on 020 7220 5110 or click here. We look forward to chatting with you.