Let the Mortgage Rate War Begin

Following interest rate cuts by the Bank of England last week and an expectation of at least 1 and possibly two further rate cuts before the end of the year, mortgage lenders both in the private residential sector and buy to let sector are going to war on rates to capture the expanding market.

July saw 2-year highs for the numbers of property seekers as well as the number of mortgage searches.

It seems that daily now, ever more lenders are launching mortgage rate deals below the 4% pa mark.  Clearly an expectation of further rate cuts and securing more borrowers is the target given just months ago, it was only rate deals above 5% and in many cases 6% that could be had.  In addition, many lenders are offering 95% loan to value deals now with an expectation that property prices will start to increase again with demand.

Comment

We do not believe rates will fall back to those heady days of below 1% and suggest a normal lending pattern last seen back in the 90s and the noughties of 3-4% deals will return as the new ‘norm’.

This may present other issues for the Bank of England.  As costs level out, the cost-of-living crisis will ease meaning more people having some spare money in their accounts.  Demand and spending equals inflation as we know.  The Bank of England will no doubt keep a close eye on managing inflation with the latest UK CPI inflation figures due next Wednesday 14^th August.  This will dictate the tone for further rate cuts or not.