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Mortgage pricing ‘signs are positive’ but widespread rate cuts not on the cards – analysis

  • 20/07/2023
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Mortgage pricing ‘signs are positive’ but widespread rate cuts not on the cards – analysis
Brokers have said that the slight decrease in mortgage pricing can be seen as a positive sign, but this should not be seen as indicative of widespread downward movement, so clients should secure a rate now.

The latest Moneyfacts figures showed that average residential two and five-year fixed rates reported the first day-to-day decrease since May.

Ben Thompson, deputy CEO at Mortgage Advice Bureau, said the market had been “quick to reprice” following yesterday’s “faster-than-expected” drop in inflation.

“A drop in mortgage rates, albeit far from substantial, is a move in the right direction after months of increasing rates. The market rates are still significantly higher than this time last year, and those who are due to renew should still be looking early to lock in the best rates,” he added.

Stephen Perkins, managing director at Yellow Brick Mortgages, said he had already been receiving emails for customers asking if they should hold off applying for a remortgage and “play the odds of a potential rate reduction” over the next month or so.

“The answer of course is to secure a rate now, and we can switch to a better rate should they become available. The recent positive news in the media about easing inflation and a potential end to continual rate rises has certainly encouraged a lot of borrowers,” he noted.

Rohit Kohli added that he was also having clients message him with swap rate charts asking if there was movement that would signal a trend in downward pricing.

“None of the big boys has moved yet, which isn’t much of a surprise. Perhaps the Mortgage Charter should have included something in there to ask lenders to commit to reducing rates just as quickly and as frequently as they increase them,” he added.


‘Too early to breath a sigh of relief yet’

Kirsty Wells, director at Blueprint Mortgages and Protection, said she hadn’t seen a widespread reduction in mortgage rates, apart from Gen H, noting that lenders on the whole had been increasing rates.

“I think it is too early to breathe a sigh of relief just yet. Sentiment may have improved but, for now at least, it hasn’t translated into a major lender repricing downwards,” she noted.

Justin Moy, managing director at EHF Mortgages, agreed that it was a “bit premature to talk about reductions”, considering the “flurry of price increases” from lenders yesterday.

“The signs are positive, but inflation is still very high, so the Bank of England will undoubtedly increase the base rate a bit further, probably by 0.25 per cent in August and the same in September.

“Just seeing rates flatline for a week would be excellent. Inevitably, tracker and fixed rates will be priced closer to each other first, and then some improvements towards the end of the summer,” he added.

Moy said the reaction from customers to the headlines showed “how much the public is looking for positivity.”

“Give it a little more time before we start cartwheeling,” he added.


‘Long way to go before we see steady reductions’

Riz Malik, founder and director at R3 Mortgages, said some people were already “predicting the peak of the market” but that these “assumptions may be too hasty”.

He said that this time next month, there should be a “clearer understanding of our economic position for the rest of the year”.

Ranald Mitchel, director at Charwin Private Clients said while average rates had fallen slightly this could be due to the retail lending market “overpricing” in the past few months.

“They still need to shift money to make money and those that have perhaps overpriced, are now trimming margins to boost lending figures. I still expect the high street lenders to be pricing circa, seven per cent within months. We’ve got a long way to go yet before we see steady reductions in mortgage pricing,” he explained.

Likely pause on ‘aggressive rate pulls’

Elliot Cotterell, director at Windosr Hill Mortgages, said it was more “likely to see [lenders] hold and take a breath rather than jump into reducing rates”.

“I’d like to think we’ll see a pause on the aggressive rate pulls but I don’t think we’ll be lucky enough to see a flurry of lenders reducing rates just yet. Hopefully, my pessimistic view is proven wrong but let’s see,” he added.

Rob Gill, managing director at Altura Mortgage finance, noted that smaller specialist lenders, including building societies and challenger banks, had been returning to the market with new products and lower rates.

“Having led the way in hiking rates and withdrawing products a few weeks ago, for larger lenders to then follow, the hope is now they’re also leading the way and mainstream lenders will again follow their lead,” he noted.

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