Lenders Cut Their Mortgage Rates

It may seem like the worst year for the mortgage market in well over a decade, but in the scheme of things, it’s not been that bad and with mortgage rates slowly going back down, could we have seen the worst of it?

Santander seem to think so, which is why they have made a bid for Alliance and Leicester – admittedly at quite a reduced rate – but over the last two weeks we have the big boys in the mortgage market cut their rates.

It is not quite the time to get the party poppers out and start buying like it were a game of Monopoly, as rates are still much higher than they were last year and fees have increased by 20% in the last 12 months.  In fact some fixed rate mortgages have risen by 60% from an average of £590 to £938.
The lenders that we have had our eyes on are the Woolwich, who have cut their rates twice this month, the Halifax who again have made two price cuts, Nationwide, Abbey and C&G.

The average fixed rates have now started to drop from their peak of two weeks ago.  On July 11th many 2 year fixed rates were 7.08%  and as of the 21st were down to 6.96%, and the same is true of 3 year fixed rates, which have also dropped by around 0.32%.

But why have they all started to drop their rates?  It comes down to the ‘swap rate’.  The swap rate is the cost to a bank of building society of buying fixed rate money, which they in turn lend to you.

The swap rates peaked in mid-June and have been slowly coming down ever since.  However, this momentum has been even slower is coming to us, which is why, a month later, we have just started to see the affects in fixed rate mortgages.

So let the good times roll!!?  Not quite.  We still have a long way to go and most of the best rates are only available to those with large deposits i.e.: 25% of the total value of the property.

Also, it is worth noting that the swap rate has started to increase again – proving that nothing about the mortgage market is predictable.
Inflation is also at 3.8% so it is going to be difficult to predict the next move of the Bank of England.
We aren’t out of the woods just yet, so hold on.

So what do we do now, we asked?!  Well, if you are about to renew a mortgage or indeed buy your first property, then if you are waiting for rates to drop further, you could be waiting a long time.  In addition, they could go up, which isn’t going to help.

The key for the mortgage market at the moment is that if you find a suitable deal, then don’t hang around.  We have no real way of predicting what is going to happen next.

First time buyers are in a better position with shared ownership mortgages and the endless options that fall into that bracket.   If shared ownership is not something that you have considered and you would like to know more, then get in touch and pick our brains.  We are here to help.