"Currently, the best fixed rates are sat at just under 4.5% but I can see sub-4% rates making a comeback."
With fixed rate mortgage rates edging down, PR platform, Newspage, asked brokers when they may drop below 4%. Some believe it’s imminent, others believe it could be some time yet.
Craig Fish, managing director at mortgage broker Lodestone: “I think we are only a matter of weeks away from fixed rates going below 4%. We have some 10-year fixed rate products currently hovering just over 4%, and it seems the competition may be hotting up in this area, with lenders looking to tie clients into longer term contracts because right now they are all vying for business. However, historically the British have never been that keen on longer-term fixed rates. We are, it seems, wary of the commitment and would rather have the flexibility of the two and five-year fixes. I would think that these options will drop below 4% also, but during the summer months.”
Lewis Shaw, founder of Teesside-based mortgage broker, Riverside Mortgages: “It's doubtful fixed-rate mortgages will dip below 4% in the next six months simply because the base rate hasn't yet stopped increasing. Even though fixed rate mortgages aren't priced directly from the base rate, any increase affects both gilts and, by extension, swap rates, often used as a reference rate for fixed rate debt. As the saying goes, a rising tide raises all boats. Therefore, if the Bank of England monetary policy committee agrees on 2nd February to a tenth base rate increase in a row, it'll mean that what we call the 'risk-free rate' will be higher and will push up swaps and, by extension, halt the downward direction we've seen over the past few weeks for fixed rates. So the advice for anyone needing to remortgage is to talk to a broker and be guided by their advice based on your circumstances.”
Kylie-Ann Gatecliffe, director at Selby-based broker, KAG Financial: “Currently, the best fixed rates are sat at just under 4.5% but I can see sub-4% rates making a comeback. We are in the midst of a competitive market between lenders, with constant rate updates and reductions. The doom and gloom from the back end of last year caused some buyers to put the brakes on. However, with the market settling down, interest rates reducing and more properties bouncing back onto Rightmove – rates dropping below 4% would be welcomed by the housing market. I predict that they will have fallen below 4% by March. As the sunshine returns, I hope we see interest rates start to thaw, providing comfort to those buyers that have been waiting for the market to improve."
Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages: “Pricing a mortgage below 4% will be a sweet spot for us all – borrowers, brokers and lenders. There is a lot to be said about the psychology of pricing, and we are getting closer to that mark. We should get there due to lender appetite, and the need to stimulate market activity. Lenders will offer the lowest rate to the lowest-risk business, typically the lower loan-to-value (LTV) borrowers. We may need to wait until February, but anyone who is looking for a new deal just needs to speak to their mortgage broker and stay in touch – they are best positioned to check quickly how the market is reacting, and what is best. Many lenders give the opportunity to change the deal if you commit now, and rates do improve, so the risk of losing a deal is minimal. Just don't take the first deal your lender will offer.”
Scott Taylor-Barr, financial adviser at Shropshire-based Carl Summers Financial Services: “We're already seeing many fixed rates in the low four per cents. So, sub-4% deals may well be on the horizon, particularly where the borrower has a large amount of deposit/equity. However, I imagine it would have a £1000+ fee, too. If you’re looking to remortgage in the next six months, I would recommend caution with holding off for something that may never come. You risk potentially ending up in a worse position. We saw last year how easily the financial markets can be spooked and rates shot up. Unless your mortgage is very large, the real world difference between a 4.28% rate and a 3.99% could actually be quite small.”
Graham Cox, founder of Bristol-based broker, SelfEmployedMortgageHub.com: “It's possible lenders will introduce sub-4% mortgages but they will probably come with hefty product fees to compensate. And this will happen only if the Bank of England doesn't raise the base rate from 3.5% on February 2nd, which is unlikely in my opinion.”
Amit Patel, adviser at Welling-based mortgage broker, Trinity Finance: “With the reduction in rates we have seen since the beginning of the year, it's highly likely that we could see them drop to below 4% shortly, as confidence has now returned to the market. To compensate for a lower rate, lenders will likely charge a higher arrangement fee to keep a margin. For those looking to remortgage in the next six months, now is the time to get the ball rolling and explore what options are available by speaking to a local independent mortgage broker.”
Elliot Cotterell, director of Bristol-based mortgage broker, Windsor Hill Mortgages: “Currently, we are seeing tracker rates as low as 3.74% and fixed rates as low as 4.31%. I see a lot of possible benefits for clients having flexibility over the next five to six months. We'll see further competition between lenders over the coming months and although another slight rise in the base rate is on the cards, we will likely see further reductions in fixed rates and I think these may drop below 4% by March, if not sooner. However, I also think in some areas of the country we will see a further reduction in property prices and this should be considered in individual cases. As always, you should speak to your adviser to make sure you make the correct plan for your situation.”
Elliott Culley, director at Hayling Island-based Switch Mortgage Finance: “If swap rates remain stable and inflation continues to fall, it's more likely fixed rates will fall further. Five-year fixed rates are more likely to fall below the 4% figure first, with rates of 4.28% already available at 60% loan-to-value (LTV). Even higher LTVs for five-year fixed rates are below 5%. In comparison, two-year fixed rates will take some more time to fall, as rates at the lower end of the LTV spectrum only recently breached the 5% barrier.”
Jonathan Burridge, founding adviser at hybrid mortgage adviser, We Are Money: “What we have learned from the past 12 months is that every prediction is a guess. It is very conceivable we will see two-year rates hit 3.99%, but do not hold out on the wish they will be. Start talking about your new mortgage needs six months before your current deal ends, and make sure you know what you want and what you can afford. Focus on the monthly payment and let the adviser give you options. Don't get fixated on fixed rates. Of course, your mortgage is important but pricing is out of your (and your adviser's) control. All they can do is give you a recommendation that best suits your needs."
