The Autumn Statement was a small dose of sanity compared with its mini Budget counterpart, held a mere eight weeks ago.
While it appears to be very much a return to the era of the austerity, so much of it had been predicted or leaked ahead of time that the markets seemed quite sanguine. Swap rates remained benign and lenders didn’t start pulling products and raising rates – although it is only Friday.
Indeed, market experts seem to believe that post Autumn Statement, rates, both the base and mortgage variety, will start to fall (sooner or later) although some feel the descent will be slower and steadier than others.
Base rates – higher or lower?
Justin Moy, managing director at EHF Mortgages, said: “The money market’s reaction suggests that recent improvements in mortgages rates will continue at a similar level.
“Slow but sure reductions with fixed rate products, as lenders look to improve the level of applications currently in circulation. [However], base rate will continue to increase a little, but to much lower levels than suggested previously.”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, agrees that the base rate will rise then fall in the middle of next year.
He said: “The most recent inflation news has led to the expectation of a further 0.5 per cent Bank of England increase in December, and they will probably go further early next year.
“This will feed through to mortgage rates. I expect to see a peak by the start of Spring and rates falling in the summer as the economy goes into recession and inflation falls back to pre-Ukraine invasion levels.”
Meanwhile, Mike Staton, director at Staton Mortgages, believes that outcomes of the Autumn Statement mean that base rates won’t hit the heights predicted by many in the markets.
He said: “The big indicator of success for me is that the predicted base rate of six per cent has disappeared and was reduced to a prediction of 4.5 per cent. Since Thursday’s Budget, there are talks that this prediction has reduced further to four per cent, and I would not be surprised if the base rate now peaks at 3.75 per cent, which is only a further increase of 0.75 per cent.”
Mortgage rates – higher or lower?
All experts who spoke to Mortgage Solutions felt that rates were on their way down but were cautious on just how far they would drop. However, a couple mentioned a lender ‘price war’ in 2023, which is either wishful thinking or could either move the market in the right direction.
Kylie-Ann Gatecliffe, director at KAG Financial, noted that reductions were already in the offing and little would change post Hunt’s speech.
She said: “Over the past few weeks, we really have started to see lenders up their game with rate reductions. They have come thick and fast over the past few days, which suggests to me that we aren’t going to see much in the way of change following the Autumn Statement.
Matthew Jackson, director at Mint FS, agreed, saying: “We should now see fixed rates continue to fall and settle at a level of between four per cent and five per cent for the forseeable future.”
Price wars
Meanwhile, both Craig Fish, founder and director at Lodestone Mortgages and Protection and Lea Karasavvas, managing director at Prolific Mortgage Finance are more rates will continue to tumble, eventually ending in ‘rate wars’.
Fish said: “As predicted lenders are continuing to make announcements of rate reductions, and this is set to continue over the coming weeks and months.
“I’m hoping that come the New Year, lenders will be eager to get out of the blocks early and start lending to hit their targets. This is likely to result in a rate war, or at least that’s what many brokers hope for.”
Karasavvas agreed: “With Virgin, Skipton and Platform all now sub-five per cent, there is scope for a price war and competition when lenders start to clear their current pipeline and focus on the New Year loan book.
“On the residential side, I see rates settling around the mid-fours for 2023 as this becomes the new norm, but I expect lender innovation to assist the pricing for first-time buyers, who will become an attractive market for lenders as house prices fall between five per cent and 10 per cent next year.”
