Falls in UK mortgage rates predicted as BoE signals dovish outlook
Banks and building societies will cut the costs of UK fixed-rate mortgages after financial markets pared back their expectations of future rises in the Bank of England’s main interest rate, brokers and lenders have predicted.
Mortgage brokers said the current high costs of fixed rates were set when markets had expected aggressive future rises in the base rate to counter soaring inflation, but those expectations had already subsided before the BoE signalled a more dovish outlook for interest rates in the wake of its latest base rate rise on Thursday.
Simon Gammon, managing partner at mortgage broker Knight Frank Finance, said: “We are expecting fixed rates to continue to fall back slightly — they are still overpriced because lenders don’t have an appetite for a lot of fixed-term lending right now, but with a period of stability, you can expect that to change.”
Another executive at a major UK lender suggested fixed mortgage rates of 1 or 2 per cent, which they were last year, were a thing of the past. “We expect in a few weeks and months to see fixed rates start to drop but almost certainly consumers will be getting rates higher than those they locked in at previously,” the person said
Lenders’ funding costs for their fixed-term mortgages are influenced by swap rates, which rocketed on September 23, when the “mini” Budget of Liz Truss’s government spooked markets and pushed up government borrowing rates.
This story originally appeared on: Financial Times - Author:James Pickford
