We’ve had it good really as far as mortgage rates go with more than 13 years of historically low pricing but we are now seeing the tide changing.
From October 2008 to March 2009, the base rate dropped every single month from 4.5% down to an unprecedented 0.5% in the aftermath of the global financial crisis.
It stayed there for a further seven years until August 2016 when it dropped even lower to 0.25% as a result of the Brexit leave vote. Over the next two years, two rate rises took it up to 0.75% by August 2018.
Then the unthinkable happened – the Covid-19 global pandemic forced the Bank to reduce the base rate twice in March 2020 to 0.25% then 0.1% – the lowest rate ever. But since December 2021, the rate is creeping up and now stands at 0.75%
The main reasons are rising inflation, which is set to go even higher, and more recently the impact of the brutal and unjustifiable Russian invasion of Ukraine.
There has also been a marked uplift in swap rates in the past few months making fixed mortgage rates more expensive for those lenders who rely on this form of funding.
Fortunately, at Landbay we have a diverse funding model and can tap into different areas of financing our loans without relying on one single source.
We have some very strong banking relationships and banks have been awash with deposits since Covid started with more people saving due to less opportunity to spend. Although that is changing now that we are out of lockdowns and trying to re-establish some sense of normality.
As well as banks, our widespread institutional funding arrangements include asset managers, private equity and securitisation programmes.
What this means is that we have been able to keep our rates low, in fact we reduced them again earlier this year. Our competitive products have been instrumental in helping us achieve a record start to 2022 with March being our best month ever for applications.
However, we must be realistic. Rates are raising across the board but we will be able to remain competitive due to our innovative and diverse funding model.
Paul Brett is managing director, intermediaries at Landbay
