Following Thursday’s decision by the Bank of England to leave the base rate unchanged, and Wednesday’s better than expected inflation data, the 2-year swap rate dropped below 5% this morning.
Speaking with Newspage, brokers welcomed the news and shared their initial speculations as to whether this drop could continue going forward.
Justin Moy, founder at EHF Mortgages, said: “This is a welcome market reaction to the Bank of England rate announcement on Thursday.
“This should make lenders and borrowers alike salivate.
“We are still not out of the woods just yet, but this is another positive step in the right direction.”
Lewis Shaw, founder of Shaw Financial Services, added: “It’s the first time the 2-year swap has been below 5% for months.
“Given that swap rates are one of the main tools for lenders pricing fixed-rate mortgages, it’s nailed on we’ll start to see 2-year fixed-rate mortgages reducing over the next few weeks if the economic status quo is maintained.
“It’ll be some time before 2-year fixes drop below 5%. However, it’s the best metric we have that more rate reductions are on their way and not a moment too soon.”
Meanwhile, Peter Stamford, director of Alston-based Moor Mortgages, said this could help reignite the property market.
He said: “It looks like the swap market is reacting to yesterday’s Base Rate decision.
“This is a really positive signal for homeowners, as it will allow banks to reduce rates and ease the pain of movers and remortgagers alike.
“I have everything crossed that this could reignite the stagnant property market. Here’s to more good news as we finish up 2023.”
Further reaction:
Graham Taylor, managing director at Hudson Rose:
“2-year swap rates falling below 5% is undoubtedly a good sign and comes off the back of the better-than-expected inflation figures, leading to a pause from the Bank increasing the Base Rate.
“With the market subdued, lenders are already starting to price quite aggressively, and we may start to see this competition increase as they are buoyed by the fall in their underlying cost of funding.”
Darryl Dhoffer, mortgage expert at The Mortgage Expert:
“The Bank of England pulled the handbrake on Base Rate rises and swaps reacted with the 2-year fixed below 5%.
“This is the best news we have heard in months.
“Surely it is a matter of days before lenders react and launch more competitive 2-year fixed rate deals, and dare I say it in the coming weeks the big six lenders come out with 2-year deals beginning with a four.
“As Delia Smith once said: ‘Let’s be having you.’”
