Base rate stays at 5.25%
Monetary Policy Committee (MPC) base rate update
Base rate remains at 5.25%
The Monetary Policy Committee (MPC) have today continued to hold their base rate at 5.25%. With inflation data for October (released in two weeks) tipped to fall significantly following the reduction in the energy price cap, it’s now more likely than not that we have reached ‘peak’ base rate. As we head towards the New Year, I expect talk among economists to turn towards when the first base rate cut may happen. Money markets are currently pricing in a 0.25% cut in August 2024, but with recession indicators flashing and inflation continuing to fall I would not be surprised if this was brought forward to May, with perhaps further cuts later in the year.Fixed mortgage rates continue to reduce
As covered in my last update in September, lenders increased their fixed rates dramatically in July when there was panic following unfavourable inflation data which briefly suggested that the base rate might have to go above 6%. Since then, lenders have gradually reduced their fixed rates by around 0.75% but there should be more to come as the SONIA Swap rates that are used to benchmark fixed rate prices have fallen further since September. The table below highlights the price for key 2- & 5-year SWAP which peaked on the 6th of July, but both have since reduced by over 1.0%. It is for this reason that best buy mortgage rates are now priced just below the actual base rate (5.19%) for 2-year fixed rates, and significantly below base rate (4.65%) for 5-year fixed rates. Basically, lenders are factoring in several base rate cuts in the years ahead so are happy to lock clients in now at a price below base rate, but there could and should be more to come.| 6th July | 21st Sept | Today | Reduction | |
|---|---|---|---|---|
| 2-Year | 6.08% | 5.09% | 4.80% | 1.28% |
| 5-Year | 5.35% | 4.45% | 4.33% | 1.02% |
Managing your mortgage
We continue to book new products for our clients up to six months in advance of a product end date, but will monitor this right through to completion to ensure that if rates have reduced further (highly likely) you’ll benefit from the lower rate. This creates lots of additional un-billed work for our teams as lenders don’t make it easy for obvious reasons, but we are always on your side and always will be!
Best 'buying opportunity' since 2009 is upon us
The increase in mortgage rates in the last two years has reduced buying power by circa 30% assuming all other things remained equal. Theoretically, one could expect house prices to also fall by 30%, however, significant wage increases, a strong labour market, lender forbearance, high rents and an increasing population requiring more housing have kept price falls to around 7.5% depending on local factors. That said, the housing market is very subdued heading into winter and there are clear opportunities out there and we are seeing some purchases agreed around 10-15% lower than what you would expect a property to have gone for in the spring of 2022.
It’s a case of identifying the opportunities which usually exist on chain-free properties in probate or separation situations. Most vendors that do not have to sell will not accept a low ball offer, hence transactions stagnate until wages catch up, or rates reduce to improve affordability. Both are likely to happen next year, hence I feel the buying opportunity is now.
How Can Jordan Lynch Help?
If you’re purchasing a new property, the process can take several months and if we arrange your mortgage, we’ll constantly review your product right up to completion to ensure that you obtain the lowest rate possible by the time you collect the keys. If you’re a homeowner and your mortgage product expires this year, we will book the best available re- mortgage or retention product for you six months in advance but will ensure that this is a product that can be cancelled, so if more favourable products are launched in the interim period, we will switch you to one of those prior to completion.
Call us on 0161 486 9316 or email sales@jordanlynch.com to learn more.