It is a matter of time before individuals see the emergence of a sub-4 per cent mortgage rate following a fall in Swap rates, according to brokers.
After inflation fell further than expected in November to 3.9 per cent, Swap rates reacted strongly to the news, falling by over 0.2 percentage points soon after the news broke.
EHF Mortgages managing director, Justin Moy, said the news on inflation “took the markets a little by surprise” and that the Swap rates “sharp” fall reflects “improved confidence in a base rate cut coming sooner than expected”.
This sentiment was shared by Lucra Mortgages director, Ben Tadd, who commented that, as a result of the change in Swap rates, he “wouldn’t be surprised” if a new sub-4 per cent fixed mortgage is released before the end of the year.
“If not, the way things are heading, we could well see a plethora of lenders with product rates starting with a 3 in early January as they look to build their lending pipelines for 2024,” Tadd said.
Additionally, The Mortgage Expert director, Darryl Dhoffer, pointed out: “Mortgage rates have been flirting with the sub-4 per cent barrier.”
While he acknowledged that “we’re not quite there yet” Dhoffer also advised that brokers should “brace for an announcement from a lender very soon”, identifying either before Christmas or early in the New Year.
Meanwhile, Contractor Mortgage Services director, Ken James, said the inflation data and the impact on Swap rates “may be the tipping point we’ve been waiting for”.
He explained that the news could encourage lenders to start to offer rates sub-4 per cent which would “certainly be a great start” to 2024.
Additionally, Rebus Financial Services co-founder, Neezam Romjon, said: “Lenders are feeling the pressure to lend given the drop in mortgage approvals this year.
“With this sharp reduction in Swap rates, lenders should be able to offer lower interest rates, which will be welcome news for borrowers around the UK and help boost the property market.”
Going further, Release Freedom director, Simon Bridgland, asked: “Who will come out swinging first? My money is on HSBC, then Halifax, then Nationwide, and perhaps Virgin.”
He added that “Christmas has not looked this rosey in a while” and that he thought borrowers and brokers “should all be raising a glass to a much more palatable New Year for interest rates”.
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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