Mortgage Rates Drop - Will It Last?
Recently, many lenders have reduced their fixed mortgage rates despite ongoing rises in swap rates. This apparent contradiction arises from lenders competing aggressively for business, temporarily cutting margins to attract borrowers. However, persistent inflation remains a significant concern. Inflation rates continue to exceed Bank of England targets, prompting markets to anticipate higher future interest rates. If inflation does not ease soon, swap rates may continue rising, pushing mortgage rates upwards again.
This creates a potential short-term window of opportunity. Clients considering securing a fixed-rate mortgage or remortgaging should act swiftly, as current reductions could prove temporary.
House Prices Show Strong Growth
As of December 2024, UK house prices have increased by 4.6% year-on-year, reaching an average price of £268,000. This marks the strongest growth rate since January 2023, reflecting sustained demand and resilience in the housing market.
However, growth varied significantly by region, demonstrating uneven economic recovery across the country. Notably, regions such as London experienced minimal to no increase, primarily due to affordability constraints, high property prices, and the impact of higher mortgage costs. Conversely, other areas showed more robust growth, highlighting regional dynamics and varying local market conditions.
Overall, despite these regional disparities, the general trend points to continued strength in the UK property market, underpinned by persistent demand and relatively limited supply.
Swap Rates Creep Higher - Inflation and Uncertainty to Blame
Swap rates have continued to rise this week, driven mainly by investor concerns over persistent inflation and broader economic uncertainty. Despite recent interest rate cuts by the Bank of England, inflation has unexpectedly climbed to 2.3%, above the Bank’s target. Additionally, increased government borrowing has raised gilt yields, directly impacting swap rates. Higher swap rates typically translate into increased costs for mortgage lenders, subsequently affecting the pricing of fixed-rate mortgage products. Borrowers should remain alert, as sustained inflationary pressures could push up mortgage rates.
8th March Swaps
28th February Swaps
