Eyes on Lenders - rates expected to drop sharply this week

Mortgage experts are expecting significant falls in the cost of borrowing this week as lenders drop their rates.

Following last week’s decision by the Bank of England to leave the base rate unchanged and the better than expected inflation data, brokers say it means more rate cuts are almost certain to come.

Brokers said there was now a better chance of these borrowers getting mortgage rates of less than 5.0 per cent when they renew.

"I expect more lenders will lower their fixed mortgage deals over the coming weeks” says Aaron Strutt, from Trinity Financial. 

“Mortgage rates need to be closer to 4.0 per cent to bring more confidence back to the market. There certainly is not a full-on price war at the moment, but rates are coming down as the cost of funding mortgages falls."

Lewis Shaw, founder of Show Financial Services, says the good news this week is likely to be as a result of swap rates - financial services industry ‘internal’ interest rates. He says: “It's the first time the two-year swap has been below 5.0 per cent for months. 

“Given that swap rates are one of the main tools for lenders pricing fixed-rate mortgages, it's nailed on we'll start to see two-year fixed-rate mortgages reducing over the next few weeks if the economic status quo is maintained. It'll be some time before two-year fixes drop below 5.0 per cent. However, it's the best metric we have that more rate reductions are on their way and not a moment too soon.”

Peter Stamford, director of Moor Mortgages, says this could help reignite the property market: “This is a really positive signal for homeowners, as it will allow banks to reduce rates and ease the pain of movers and remortgagers alike. I have everything crossed that this could reignite the stagnant property market. Here's to more good news as we finish up 2023.”

And Andrew Montlake, managing director of the mortgage broker Coreco, adds: “This should give lenders plenty of room for manoeuvre when it comes to product pricing. I suspect this will be the catalyst for a new set of cheaper products that stimulate both the purchase and remortgage market alike."