The BoE maintained central bank rate at 5.25 per cent, halting the 14 consecutive rate hiking cycle that began at the tail-end of 2021.
Vikki Jefferies, proposition director at Primis Mortgage Network, said that today’s decision was a “welcome relief for borrowers already struggling with the cost of living crisis and high interest rates”.
She continued that this would “accelerate the price war”, with many lenders cutting their rates in recent weeks and fixed rate mortgages in some cases falling below five per cent.
“Nonetheless, rates remain significantly elevated when compared to the rock-bottom rates of recent years, and brokers will need to help consumers adjust their expectations of what a ‘new-normal’ for interest rates may look like.
“It’s unlikely that rates will return to the historic lows of one and two per cent any time soon, and this should now be factored into any decisions about affordability moving forward,” Jefferies added.
She urged brokers to offer education and context to “empower consumers to make informed decisions around products, particularly as the rate landscape continues to evolve”.
Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed, adding that consecutive rate rises have been “painful” and “it’s time to leave alone for now, rather than causing continued anxiety and distress for borrowers”.
He agreed that while the “days of rock-bottom mortgage rates are long gone” pricing is expected to improve in the coming weeks with more sub-five per cent deals coming to the market.
“Supply is outstripping demand, which will drive down rates and swaps, which while still a little volatile, are trending downwards. While we know this can all change again on the back of negative data, for now the outlook is much more promising than it was three months ago,” Harris explained.
However, he warned that borrowers coming off cheaper fixed rates would face a payment shock, making it important to plan ahead. Harris said that borrowers were opting for shorter-term fixed rates and base rate trackers with no penalties “in the hope that they can fix for longer once rates become more palatable”.
Lender price war bodes well for 2024
Andrew Montlake, managing director of Coreco, said that it looks like we have reached the “very top of the interest rate cycle” and swap rates were “continuing to ease”.
He continued that this was “giving lenders more space to engage in a rate war as they battle for market share and look to get a good start to 2024”.
“As this competition increases, we will see more products available starting with a four rather than a five and this will inevitably start to encourage more buyers back into the market as they seek to take advantage of the buyers’ market while it lasts,” Montlake added.
Richard Campo, founder of Rose Capital Partners, agreed that it looked like we are nearing the peak of this current cycle which could increase confidence for buyers.
“The seemingly endless rate rises from the BoE were causing borrowers to procrastinate on committing to their new remortgage deals and putting off some would-be homebuyers completely.
“This could even bolster house prices as we have seen huge pent-up demand in recent months from people holding buying off until mortgage costs stabilise,” he added.
Samuel Bull, senior mortgage adviser at Huddersfield-based mortgage broker, JB Mortgages added: “I am hopeful that in 2024 mortgage lenders will start competing for market share with rates starting with a four, rather than a five.
“This will no doubt encourage more buyers back into the market as they seek to take advantage of the ‘buyers’ market’ whilst it lasts.”
Affordability could still be ‘clear obstacle’
John Phillips, CEO of Spicerhaart and Just Mortgages, said that while the news was a “positive” for mortgage holders and the general public, the cost of living would still have an impact on affordability.
He explained: “While yesterday’s good news on inflation certainly made the pause more palatable for the Monetary Policy Committee, there’s no question high household costs – particularly fuel, food and energy, still present a challenge. As a result, affordability will remain a clear obstacle for both borrowers and brokers.
“Brokers will continue to play a critical role by using all the tools available to help clients make the numbers work, whether that’s the many households still set to remortgage or those that need to move. Lenders have played their part in recent weeks to reduce rates considerably and news of stability in interest rates may allow lenders to loosen the purse strings a little further,” he added.
