Economic data
This has been a very busy week for macro data. Firstly, we saw a surprise increase in US inflation to 3.1% followed by confirmation that UK wage inflation continues to outstrip CPI inflation at 6.20%. Taken together, these factors give reason for the Bank of England to push back the time horizon for the first base rate cut.
Secondly, we saw UK inflation remaining static at 4.0%. This was a surprise as the energy price cap increase meant that forecasters thought it would increase to 4.2%, but a fall in the cost of food and household goods balanced it out. Furthermore, this morning we learned that the UK entered a recession in the second half of 2024 (albeit a very shallow one). Taken together, these factors give reason for the Bank of England to bring forward the time horizon for the first base rate cut.
The upshot of all the above is that we are pretty much where we started. The financial markets are pricing in 3 x 0.25% cuts to base rate this year, with the first most likely to come in June.
Mortgage rates
Best-buy fixed mortgage rates continue to be available under the true cost of funds (swap rate) on low loan to value (LTV) applications at 60% LTV, but at the most common 75% LTV tier they are still highly competitive. Even at 85% LTV for prime borrowers some lenders are offering fixed rates that are priced only marginally above their cost of funds.
Securing a best-buy rate isn’t straightforward as lenders are dipping in and out of the market withdrawing products at very short notice. At Jordan Lynch Private Finance we never like to be pushy, but if one of the advisors calls you to say a product is being withdrawn at 6pm and we need a decision now at 5pm, they'll genuinely be telling you the truth.
Secure a new product six months in advance
As best-buy fixed rates are favourably priced at a level significantly below base rate and below cost of funds, we reiterate our advice from January that all borrowers with products expiring in the next six months should act now to reserve a new product, as we're no longer in a climate where it’s obvious lenders will reduce fixed rates in the months ahead.
The options remain a rate switch from the existing lender or re-mortgage with another lender. As ever, we will assess both options and reserve you a new product or book a re-mortgage. We'll then continue to monitor rates right up until completion to ensure you secure lower rates if they become available. It’s very important to note that if you book a retention product direct, that the lender will not inform you of any rate cuts, and as the broker is cut out of the transaction completely, we are unable to book lower rates for you should they become available.