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Bank of England Base Rate 5.25% (No change)
Market Overview
September saw the Bank of England (BoE) keep interest rates on hold with voting from the Monetary Policy Committee (MPC) being 5-4 in favour of a freeze. The economic headwinds are now starting to show with a rise in unemployment, and inflation falling fast (despite economists expecting a rise due to a rise in Brent Crude). It seems the 14 rate rises from the BoE are now impacting demand. At 177 Mortgages we think the BoE has overcooked the rate rises, we are at the ‘coalface’ and see how much impact these increases have had on the market. We are therefore forecasting that rates will start to decrease much faster than economists currently think they will. Most economists are predicting a ‘table top’ graph for rates – with rates staying elevated for a prolonged period of time before coming back down.
The good news is that the hold on the BoE rate has installed some confidence back into the market. Demand has increased recently which is good to see. Additionally, SWAP rates (the rates at which banks buy and sell money to each other) have now started to drop substantially. This will filter through over the coming months to the rates on offer. Increased competition, lenders trying to reach their yearly lending targets in the final Quarter of the year, and them reducing their margins should all result in lower rates coming to the market.
The good news is that the hold on the BoE rate has installed some confidence back into the market. Demand has increased recently which is good to see. Additionally, SWAP rates (the rates at which banks buy and sell money to each other) have now started to drop substantially. This will filter through over the coming months to the rates on offer. Increased competition, lenders trying to reach their yearly lending targets in the final Quarter of the year, and them reducing their margins should all result in lower rates coming to the market.
- Some welcome relief for mortgage customers as mortgage lenders reduce rates as swap rates start to reduce.
- Competition is heating up as mortgage lenders continue to fight for new business and achieve end-of-year lending targets, reducing interest rates to entice new borrowers.
- Lower rates bring increased borrowing capacity and mean people can borrow more than they could a few months ago.
- We also saw a number of lenders reduce their fixed rates to below 5% for the first time in over 12 months
Biggest Challenges
- Rising cost of living – Smaller deposits.
- New Homes demand outstrips supply.
- Lender affordability and loan to income caps – Restricting lending.
- Lack of Government support for first time buyers.
Dates to be mindful of
- The next Bank rate decision will be announced on 2nd November 2023.
- EPC cap will fall to £1,923 for the period October to December 2023.
All in, as we head into Q4 we think ‘yes things could be better’ but there are green shoots appearing. We think that will set things up nicely for some nice surprises in 2024 with improved rates, improved affordability and more demand. It appears that the public is now realising that the rates we all pay won’t be going back to sub 2% that many of us have been used to. So, it’s best to adapt to this new market and as Mortgage lenders continue to respond well with rate reductions and increased competition. While challenges persist, there is optimism.
As always, the team are on hand 7 days a week to answer any queries you have. And remember our advice is free. Get in touch today on 0800 098 7177 or book a call back.