Brokers share their views on the latest wave of rate cuts
Over the past month many lenders have reduced rates below the 5% margin, however this has not appeased everyone.
In fact, one broker compared the latest wave of rate cuts to their daughter expecting praise for cleaning up the mess she had made in her own room.
Mortgage Introducer reached out to brokers for their views on the latest wave of reductions.
Should lenders be praised for rate cuts?
“Watching lenders shout about dropping rates is a bit like my five-year-old daughter expecting praise for cleaning up the mess she made in her bedroom,” said Mike Staton (pictured), director at Staton Mortgages.
The latest wave of reductions the sector has seen, he added, are nothing more than a “genital measuring competition”.
Although a step in the right direction, Staton said, the market still has a long way to go before it can breathe a sigh of relief.
“Come back to me on lower rates when they are low enough to make a positive impact on people’s lives,” he added.
Instead, Staton said people are just being held to ransom at the moment, and the majority of homeowners are living in a constant state of fear.
Imran Khan, co-founder and chief executive at PropertyLoop, agreed that the latest wave of modest reductions were not much relief in the face of significantly higher borrowing costs, especially compared to the lower costs of preceding years.
“Buyers are still adjusting to a harsher reality, considering lower-priced properties as monthly mortgage costs climb,” he said.
This rate adjustment, Khan added, seems to be a small attempt by lenders to encourage borrowing, yet the real barrier remains - ongoing high inflation.
The market awaits a substantial change, which he believes could come with a reversal in the inflation trend, followed by a notable reduction in interest rates.
“Until that scenario unfolds, we are navigating a ‘new normal’; transaction levels of yore seem elusive as the market recalibrates to align with current economic dynamics, setting a fresh baseline for property prices and buyer affordability amid these higher interest rates,” Khan said.
Will the mortgage market see a rate war?
Jamie Alexander, mortgage director at Alexander Southwell Mortgage Services, believes the latest rate cuts mark another step in the right direction as buyers adapt to a challenging reality, however notable sticking points remain.
While this modest rate adjustment is an effort by lenders to encourage borrowing, he said, the primary obstacle remains the persistently high inflation rate.
Alexander added that transaction levels reminiscent of the past also remain elusive as the market undergoes a recalibration to align with the ever-evolving economic landscape.
“This recalibration is establishing a fresh baseline for property prices and buyer affordability in the context of these elevated interest rates,” Alexander said.
Rohit Kohli, operations director at The Mortgage Stop, agreed with Alexander and added that lenders had been moving towards reducing interest rates for a few weeks now.
“With swap rates continuing to decline, it has enabled the stable environment needed in the economy to allow lenders to reduce their rates,” he said.
However, Kohli does not anticipate a full-on price war as the environment is still on a knife edge, with just a small rise in inflation likely to spook the market, reverting the sector back to square one.
So, Kohli believes that this slow and cautious approach from lenders to rate cuts will continue for some time.
What is your view on the latest wave of rate cuts from lenders? Let us know in the comment section below.
