This morning, in its September house price index, the Nationwide announced that “investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening.”
This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.
However, due to higher oil prices filtering through, many city traders are now betting on another base rate increase in November.
As such, 2- and 5-year gilt yields have risen over 20 basis points in recent days and swaps have edged up in response.
As a result, Samuel Mather-Holgate of Mather & Murray Financial, has claimed “the mortgage price war is over.”
Iain Swatton, director at Exemplar Financial Services, agreed: “The recent surge in oil prices has spurred predictions of a base rate increase in November and it’s likely to signal the end of rate cuts for the near future.
“Fixed rates will probably start climbing and so consumers should explore attractive deals now before potential mortgage rate hikes.”
His views were shared by Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages.
He said: “The hike in swap rates towards the tail end of last week is concerning given the recent reductions, which have led to lenders repricing downwards.
“This reinforces the notion that the euphoria of the hold decision by the Bank of England may be short-lived.”
Much the same verdict was reached by Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “With the oil price rising, it’s looking like the mortgage rate cuts in September could quickly be reversed. If inflation ticks up, then it’s plausible we get a further 0.25% base rate rise in November.
“Whilst gilts and swaps aren’t directly correlated to the Bank of England base rate, they are a great indicator of sentiment.
“Anyone needing to remortgage may not want to hang about because we’ve no idea how long these rates will be around.”
Katy Eatenton, mortgage and protection specialist at St. Albans-based Lifetime Wealth Management, also suggested lenders could be more cautious in October, but that the one factor acting in borrowers’ favour is lenders fighting for market share: “The excitement over sub-5% mortgage rates may be shortlived if swap rates continue to edge up, as they did at the end of last week.
“We may start to see more cautious repricing until we receive the inflation figures in October and the Monetary Policy Committee meets again in November.
“However, the saving grace is that lenders are still desperate to do business and get as many applications in while they can still service the demand.”
Meanwhile, Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages, urged borrowers to be vigilant.
He said: “For consumers, it might be wise to lock into existing deals before further hikes materialise, capitalising on current rates amid looming uncertainty.
“The evolving economic landscape calls for vigilance and timely action to navigate potential financial shifts.”
But Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, urged borrowers not to panic: “Yes, the rise in swap rates will likely slow the rate cuts we have seen recently, as lenders take time to see how deep-rooted the current increases are.
“However, I do not think there is a need to panic if the base rate goes up again, as any increase in November would simply replace the expected rise from September that did not happen. Don’t panic, Mr Mainwaring.”
For Graham Cox, founder of the Bristol-based broker, Self Employed Mortgage Hub, rising swap rates were like a scene from Jaws: “Just when it looked safe to dive back in the mortgage waters, along comes a 20ft long shark to put the fright back into the markets.”
