Mortgage rates are forecast to decline as figures show that average swap rates have started to fall, research from Octane Capital has revealed.
Octane Capital analysed average swap rates over 30 and 60-day periods to predict what could be in store for the market as we approach an expected base rate reduction from the Bank of England on 1st August.
With the UK economy finally showing signs of improvement and with inflation falling to the target rate of 2%, it is widely expected that a cut to interest rates is on the cards in August – a year on since the Bank of England increased the base rate to its peak of 5.25% in August 2023.
The mortgage sector is already responding in anticipation, with swap rates showing early signs of decline.
Over the past 30 days, swap rates declined at an average daily rate of -0.22%; in contrast, the 30 days prior to that saw swap rates increase at an average daily rate of 0.06%.
Over the last 60 days, swap rates fell by an average of -0.08% daily, compared to an average daily increase of 0.13% over the previous 60 days.
Jonathan Samuels, CEO of Octane Capital, said: “With inflation finally falling to within the Bank of England’s target rate of 2%, there’s a high chance that we could see a cut to interest rates come August, a year on from them hitting their recent peak of 5.25%.
“We’re already seeing swap rates start to reduce in anticipation of a potential base rate cut and we expect this trend to continue as the next Bank of England decision approaches.
“This will be welcome news for mortgage holders who have seen the cost of their repayments climb considerably in recent times, and so too for prospective buyers who have had to re-evaluate their position in the market due to increased borrowing costs.”
