Is a boom coming?
While some will be humming Labour’s ’97 anthem Things Can Only Get Better in the aftermath of Keir Starmer’s momentous win in the General Election, mortgage brokers might be whistling a variation – Things Can Only Get Lower…
A flurry of reduced rates came from some of the market’s biggest lenders as polling stations dusted off the ballot boxes and opened their doors to millions of British voters, leaving the industry to speculate on whether the rate revisions were pure coincidence, or a nod towards the greater confidence in the UK economy that a change of government might bring.
Who knows for sure… but the decisive action by the sector’s key players perhaps reflects a sea change in public mood, and has prompted a domino effect of lenders falling in behind each other, to show just how competitive they can be.
Among the big guns flexing their muscles was NatWest, which actually stepped up a couple of days before the election, announcing that, for new business, purchase rates would decrease by up to 23 basis points (bps) on selected two-year deals and 12bps on selected five-year mortgages. Its remortgage rates also dropped by up to 13bps on selected two-year options and 8bps on selected five-year deals.
Halifax weighed in by slashing rates across a number of mortgage deals, by 0.19 percentage points, and not to be outdone, Santander announced rate cuts across its fixed rate deals by up to 0.16 percentage points. Barclays also declared its hand - among its rate reductions is a decrease from 4.25% to 4.22% on its residential purchase-only products. In its existing customer reward range, a two-year fixed product with a £999 fee at 60% LTV today drops from 4.75% to 4.67%. HSBC is expected to follow suit with an announcement of fresh reductions.
Will the second half of 2024 bring a busier mortgage market?
In the view of Gindy Mathoon (pictured left), leader of Derby-based mortgage brokers Create Finance, the rate reductions have followed a relatively quiet first half of the year for lenders, and could kick start a new trend of rates being slashed.
“What you’ll probably find in the second half of this year, when they gain a bit of market confidence, lenders will probably start having the rate wars that they are having now and drop down their rates, so that it becomes attractive to borrowers,” Mathoon commented. “We need rates to come down so that the housing market picks up. Cheaper rates and cheaper monthly payments are good for brokers and good for borrowers, ultimately, because it will lead to more transactions.”
Joela Jenvey (pictured second from left), independent mortgage and protection adviser at Nurture FS in Devon, believed that lenders are reacting to the impact of an early election, which has created a lull in the purchase market. She warned that this would be closely followed by a seasonal dip in volumes over the summer holiday, when daily run rates are historically low for new mortgage submissions.
“Every year lenders from all mortgage sectors launch ‘summer sizzlers’ or ‘limited edition products’, however this year because of the election we are seeing the price war start a little earlier than usual,” she suggested. “Now swap rates are reasonably stable, lenders will be focusing on taking market share. Acting now on increasing front end business will positively contribute to achieving completion targets for 2024.”
Jenvey added that this could also kick start securing strong pipelines of business into 2025.
“This good news story can only be a positive for the customer as well as the broker and will reinforce confidence for customers moving home and wanting to be in before Christmas,” Jenvey commented, “and for the remortgage customers who have been paying higher monthly payments, sitting on variable rates, waiting for cheaper fixed rate products.”
George Sanford (pictured second from right), specialist mortgage adviser at VIBE Finance, was encouraged by the rate cuts.
“From a specialist lending perspective the big names on the high street dropping rates tends to mean our market will shortly follow, so certainly a positive sign,” he reacted. “Clients need to be on the ball to take advantage of these rates and be aware that these rate drops can just as quickly and easily be reversed should the lenders see a shift in the markets or an influx of too much business.”
Sanford added that it was key to get cases submitted and rates locked, in case of further changes. “We can’t bring rates back from the past!” he quipped.
Read more: Barclays to lower rates on select mortgages
Is the UK economy stabilising?
North of the border, Helen MacKenzie (pictured right), consultant at MacKenzie Mortgages, in the Scottish Highlands, noted that the cuts were modest, but hoped it was an indication that things were stabilising.
“We are delighted to see the lenders having the confidence to reduce interest rates, albeit small reductions,” she said. “Hopefully this is a positive sign of stability in the economy and financial markets and this will continue to stabilise the housing market and give clients hope that their living costs will be reduced.”
Samuel Whittlesea, at Whittlesea Mortgages, based in Somerset, was less impressed, and believed we should put more stock on the General Election result.
“These are just minor tinkerings like we get in any week in either direction,” he reasoned. “The fallout from the election is the only thing that matters, surely, as the coming weeks and months will affect market confidence, swap rates and lender strategy.”
Industry commentator David Hollingworth, associate director of communications at L&C Mortgages, declared that the rate cuts were welcome news, but sounded a cautionary note.
“These cuts are often relatively small but as one lender shifts, the competitive pressure mounts and leads to additional momentum building,” Hollingworth said, “even if, so far, it’s largely unwinding the rises of the last few months.
“As we move closer to a possible base rate cut, this should help to build consumer confidence and hopefully activity levels in the market. The only danger is that borrowers hold off, expecting big cuts to come, which may not materialise and potentially risk falling on to a higher rate in the meantime.”
