The return of the sub-5 per cent five-year residential fixed rate is “now looking imminent” Coreco managing director, Andrew Montlake, has argued.
Montlake explained that, with mortgage lenders “battling” for market share “we can expect to see continued rate and criteria improvements over the next quarter”.
It comes as The Mortgages Works announced a five-year fixed rate deal at 4.99 per cent, with a 3 per cent fee.
This is the first sub-5 per cent deal brokers have seen for months and is consistent with falling Swap rates.
Montlake added that the market could be about to “scale the peak of the recent interest rate cycle”, with one more rate rise to 5.5 per cent already “hard-baked” into mortgage pricing, therefore having little impact on rates.
However, Montlake acknowledged that “much now rests on the next inflation report” and “we can only hope that the Monetary Policy Committee opts to pause, or at most raise by 0.25 per cent.”
A similar sentiment was shared by other brokers such as KAG Financial director, Kylie-Ann Gatecliffe, who added: “With Swap rates reducing and the completion between lenders heating up, I believe we will continue to see rates fall.
She additionally stated that this would be the case even if the bank rate increases by 0.25 percentage points, which she described as “great news for the market".
Inflation is key
R3 Mortgages director, Riz Malik, also predicted that mortgage rates will continue to fall even with a 25 basis point increase at the next Monetary Policy Committee meeting, so long as there are “no nasty surprises in the inflation print”.
He explained that a “hold” decision would shake the market and result in “substantial” cuts.
Blue Fish Mortgage Solutions owner, Ross McMillian, also highlighted the importance of the next inflation report stating: “Inflation remains the key measurement.”
He added that as long as this maintains or improves on the downward trend seen last month then confidence that “we are over the peak of the rate mountain should gain momentum".
As a result of this, McMillian suggested that lenders are likely to “really begin to fight” for their share of the “diminishing” market.
“This should be good news for borrowers of all kinds as we head into 2024," he predicted.
This sentiment was shared by EHF Mortgages founder, Justin Moy, who said: “Even if the base rate were to increase by 0.25 per cent, mortgage lenders would look to continue to make small cuts, if only to attract more applications.”
Moy added that “this is especially the case in the buy-to-let market.”
Hudson Rose managing director, Graham Taylor, additionally explained: “Lenders will most likely have already factored in a 0.25 per cent increase in the base rate next week when pricing their current ranges.”
Therefore, Taylor stated that he would not expect a massive change in fixed rates following a 25 basis point hike.
