Brokers believe stability and certainty are slowly returning
Coventry Building Society has followed the latest trend of lenders cutting interest rates, with it reducing all two- and five-year fixed new business rates starting today (July 28).
So is stability and certainty returning to the market? Mortgage Introducer has spoken with several brokers as to what they expect moving forward.
Removal of ‘panic’ premium
Lewis Shaw (pictured), founder and mortgage expert at Shaw Financial Services, said what we are currently seeing with lenders is the effective removal of the ‘panic’ premium from fixed rates.
“Only a few weeks ago, gilt yields and, by extension, swap rates, were highly volatile, with huge swings occurring, meaning lenders were unsure as to where to set their pricing,” he explained.
Shaw believes the positive inflation news of recent weeks has filtered through, and both gilt yields and swaps have resumed regular market movements, enabling lenders to price their mortgages more accurately.
However, Shaw added that we should be under no illusion – we will not see a continued price reduction for rates just yet.
“All that is happening is the sting has been taken out; I would expect rates to settle where they are for a while, rather than the jostling for position and market share like we usually see,” he said.
Treading carefully
Rohit Kohli, operations director at The Mortgage Stop, said we are starting to see the main lenders reduce rates which is welcome news.
“It will bring some relief to borrowers who are very stressed about where their mortgage payments are going,” he said.
Kohli added that all eyes are on August 3 now to see what the Bank of England’s Monetary Policy Committee chooses to do regarding the base rate.
“My fingers are crossed for some stability but I think inflation still needs to come down further before we see an end to rate rises from Threadneedle Street,” Kohli said.
Craig Fish, director at Lodestone Mortgages & Protection, said lenders’ cutting rates is overdue good news for the UK mortgage industry after what feels like a long siesta.
“I expect similar news to arrive like buses, with more lenders making similar reductions,” he said.
Fish believes we need to tread with caution though and not get overexcited while we await the next base rate announcement from the Monetary Policy Committee, and the next eagerly awaited inflation data, as that could change everything.
Riz Malik, founder and director at R3 Mortgages, added that it was encouraging to see a popular lender among brokers embracing the trend of lowering rates, and we can only hope that this triggers a domino effect across the rest of the mortgage industry.
“We all anxiously await the upcoming base rate announcement from the Bank of England, hoping for no unexpected surprises so the run of rate reductions can continue,” he said.
For now at least, Malik added that the market outlook appears far brighter for borrowers.
Coventry’s view
Ben Williams, corporate account manager at Coventry Building Society, said last week’s inflation figures and the subsequent reduction in swap rates was the welcome news we had been hoping for.
“It has given us the opportunity to reduce rates on the majority of new business products and return value to borrowers wherever we can,” he added.
Do you believe stability and certainty is now slowly returning to the market? Let us know in the comment section below.
