With the financial markets starting to calm, Andrew Bailey, the Governor of the bank of England says he expects to see mortgage rates fall.
Rates are typically priced off the market curve – where investors think Bank rates will be in the future, and so when that curve jumped after the mini-budget, mortgage rates inevitably increased.
Bailey commented at the end of last week “I would hope that is now calming, as the curve is falling and becoming more predictable.
The Governor of the Bank of England has warned the money markets that the interest rates will not rise as high as they have been – and issued a rebuke to lenders that mortgage costs do ”not need to rise as they have done”.
Bailey said that borrowing costs will peak at a lower level than traders are predicting, even as he announced the biggest interest rise in 30 years, he added “we can’t make promises about future interest rates but based on where we stand today, we think that Bank rates will have to go up by less than currently priced in the financial markets.
Bailey also suggested that fixed mortgage rates had peaked. “Rates on new fixed term mortgages should not need to rise as they have done” – he said
The Bank of England put rates up by 0.75% to 3% last week, despite this, some mortgage lenders have continued to re-introduce a sweep of fixed-fee mortgage deals, with some lenders cutting their rates by up to 0.45 percentage points.
On November 4th Lloyds owned Halifax, one of the largest lenders in the UK mortgage market, re-introduced a handful of £999 fixed-fee products at lower rates.
Clydesdale Bank, part of Virgin Money, has reduced rates by up to 0.25% on two and five-year deals with rates now sitting at 5.44%.
Skipton Building Society has also cut rates on five-year deals, introducing rates reduced by up to 0.29 percent, while YBS Commercial Mortgages has cut its rates by as much as 0.45 per cent and major lender Santander has updated its residential affordability calculator following the latest household expenditure figures published by the office of National Statistics.
David Phillip commented “currently, two-year rates are 4.3%, down from 5 percent at the beginning of October and although some of these changes are admittedly marginal, the rates are going in the right direction of travel and a relief for home-owners, with most lenders showing some reduction to what may be the new level”
He added “absurd as it sounds, you might find that more mortgage rates will reduce as the base rate has not increased as high as some feared. The base rate of 3% is not that high by historic standards, though many borrowers will have got used to the ultra-low rates following the financial crash of 2007-08”
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