Speaking on BBC Radio 4’s Today programme this morning, Leeds Building Society’s chief executive Richard Fearon (pictured), said: “This mortgage price war has become very visible this week, but rates have been dropping through the last part of last year following the lower inflation figures.”
He noted that since October, it had reduced rates 11 times across its 328 products, and while there was a Christmas lull the market has “come back with a bang and is really competitive”.
Fearon continued that rates were down one per cent since last year but if you “shop around you can do even better”.
“Tuesday was actually our busiest working date ever in the 149 years since we were founded, which is great for hard-pressed homeowner and aspiring first-time buyers,” he added.
Fearon said that the Bank of England was “very cautious about the prospect of base rate reductions” as inflation was a “bit more stubborn” in the UK than in other economies.
However, he noted that the market was “pricing in” a base rate reduction by May and the Bank of England base rate by May and six by the end of the year.
“Now, to some extent, the market is already providing help to some homeowners already because that rate is expected to fall and that means the cost of money for lenders which we use to fund our mortgages is lower, and it’s that benefit which has been passed on to homeowners as we speak,” Fearon said.
Leeds CEO: Borrowers should seek independent financial advice
Fearon said that people whose mortgage deals were maturing at the moment were coming off average rates of two per cent, meaning many could be facing a dramatic payment increase
He urged borrowers to review their finances before their fixed rate matures as the average standard variable rate stood at 7.7 per cent, equal to an extra £500 a month or £6,000 a year.
Fearon noted that there would still be a payment shock going on to its market-leading two-year fixed rate at 4.6 per cent would be a monthly increase of £200 per month, but would be preferable to the SVR.
“It is a big step up that comes on top of energy price increases, higher food costs so it is not an easy time for household budget,” he added.
Fearon urged borrowers in these circumstances to “take independent financial advice”, noting that there were 18,000 mortgage brokers in the UK and “do a great job of helping people through what’s a really complicated landscape”.
When asked about product fees, he said that it would depend on the mortgage size as to what the best option was but getting independent financial advice would be paramount.
Low housing supply ‘elephant in the room’
Fearon said that the “elephant in the room” was still housing supply and was pleased to see that homeownership was on both political parties’ agendas for the upcoming election.
“We firmly believe every generation deserves a place to call home and that is going require long-term thinking and political courage,” he added.
He said that “building more houses of all types providing and offering more support for deposits” was vital as otherwise homeownership was “going to be a preserve of those who have the help of Bank of Mum and Dad”.
Leeds BS CEO Richard Fearon starts speaking on the programme at 15:25.
