"Even though rates are currently falling, which is welcome news, the reality is that they may fall even further in the future."
Despite last week's base rate rise, mortgage brokers have said the price war between lenders continues to rage, with fixed rates "falling daily".
Newspage asked brokers for their views:
Steven Morris, director at Bristol-based independent mortgage broker, Advantage Financial Solutions: "Such is the breakneck speed of the fixed rate mortgage price war currently raging that brokers up and down the country must be having nervous breakdowns. Every time we apply for a fixed rate for a customer, within no time it's cheaper elsewhere. I am currently on application number six for the same client in a bid to get them the best deal, which must be a personal record since I started advising back in 2008. On the one hand, it's great, but on the other, it's outright insomnia."
Katy Eatenton, mortgage and protection specialist at St. Albans-based Lifetime Wealth Management: "Fixed rates are falling daily and the price war is very real. However, while this is brilliant news, those that are completing purchases or remortgages imminently will miss out on further future reductions unless they go for a tracker with no ERCs for the next few months until fixed rates stabilise and then switch over. The downside to a tracker, of course, will be if the Bank of England raises the base rate again towards the end of March."
Luke Thompson, mortgage adviser at King’s Lynn-based PAB Wealth Management: "It is important to remember that back in September and October of last year, due to the mini-Budget, there was a significant amount of turmoil in the money markets and this caused rates to have no real correlation to the Bank of England base rate. What we have seen recently is the return of normality to the markets, which has meant that lenders have been able to reduce their rates. In addition to this, fewer buyers due to a slowdown in the property market has meant lenders have had to start competing for business, which has triggered the fall in fixed rates over the past month or so. I had a customer last week who was able to save over £150 a month compared to the interest rate I was originally able to offer them back in December."
Riz Malik, director of Southend-on-Sea-based R3 Mortgages: "Even though rates are currently falling, which is welcome news, the reality is that they may fall even further in the future. Therefore, many borrowers are wondering if now is the right time to lock into a long-term fixed rate, especially since most have penalties for early termination. Rates could fall just as quickly as they have risen if certain economic conditions prevail."
Gaurav Shukla, mortgage adviser at London-based broker, Home Me: "The competition in the fixed-rate market is getting hotter by the day with all the main lenders wanting to be the best priced. There is another mainstream lender who is reducing all their fixed rates on Tuesday 7th Feb. We've seen many lenders do it over the past few weeks and there's no signs of it slowing down. This competition has come at the right time as it is attracting more people back to the housing market, which in turn shouldn't see property prices drop as much as more people will want to buy. It's reassuring for those looking to remortgage as the rates aren't as high as before, but ultimately still higher than they are on, so definitely speak to your broker about the best way forward."
Gary Bush of the Potters Bar-based MortgageShop.com: "Fixed mortgage rates are rolling in the right direction, namely downwards, despite the recent Bank of England base rate rise. This had all been factored in as happening by the market before the Monetary Committee met. Seeing the first sub-4% fixed rate appear back on the spreadsheet last week from a very positive-thinking lender was a great sight at the end of the first month of 2023. It seems that lenders are going to have to go back to thinking as they did before the 2008 banking crash in releasing mortgage products that the public needs, and at the right price point."
Lewis Shaw, founder of Teesside-based mortgage broker, Riverside Mortgages: "Any further rate reductions are lenders jostling for market share but the size of the reductions is minimal. It's about lenders getting to the top of a rate table for a few days when they have a tranche of money they want to lend. Where rates are now is about where things will settle for the foreseeable future. This is the new normal, so anyone thinking they'll wait for rates to come down by any meaningful amount will probably be disappointed."
Aaron Strutt, product and communications director at Trinity Financial: "Some of the mortgage lenders were improving their rates on the day of the base rate hike, which is quite incredible. The banks and building societies are getting used to the Bank of England's announcements. They know that the higher rates go, the tougher it will be for borrowers to get an affordable mortgage let alone a large enough mortgage to purchase the property they want."
Ashley Thomas, director of London-based mortgage broker, Magni Finance: "Rates are dropping every week, and I expect this to continue. Lenders were anticipating the base rate to increase last week, but it has not changed their stance on mortgage rates. In reality, it is unlikely that mortgage rates will be at the same level in five years, and most expect them to be lower. We have seen a shift in clients looking to go for a five-year fixed to two-year fixed, or more often than ever, a tracker rate."
Imran Hussain, director at Nottingham-based Harmony Financial Services: "Fixed rates have been falling ever since the catastrophe that was Trussonomics came to an end. We are currently in the thick of a rate war, especially for the best borrowers, who are especially attractive in the current economic climate."
Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages: "With fewer people likely to move in 2023, lenders are fighting to win market share from a reduced pool of customers seeking mortgages. As a result, we have seen lenders consistently reduce their pricing on their fixed-rate mortgages to try and gain a foothold on the market. Most days we are greeted with multiple lenders emailing to confirm they will be reducing mortgage rates, which will be a huge relief for the millions of customers needing to remortgage during 2023."
Gary Boakes, director of Salisbury-based mortgage broker, Verve Financial: "Competition between lenders is great to see. It's driving rates down, which is extremely welcome news for our customers who are purchasing and remortgaging. With the ISA season in full flow now, the banks will have more cash to offset, so expect rates to continue to drop as lenders look to be on top of the rates and start 2023 positively. Speaking to two of the top 10 lenders' BDMs last week has highlighted how competitive this year will be as their lending targets are higher for 2023 than in 2022."
Austyn Johnson, founder at Colchester-based Mortgages for Actors: "Swap rates, the rate at which lenders can borrow money from the Bank of England, are stable. As long as they stay stable, lenders can stay competitive and bring their margins down to help clients benefit from lower rates. As long as this continues, we will see a very good market for mortgages and a good five-year fixed selection."
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: "With the housing market slowing, lenders are battling to maintain market share and profitability. Perhaps even more importantly, the base rate may have peaked at 4% though that's by no means guaranteed. With swap rates falling, banks and building societies are more confident in pricing their products. But I don't see fixed-rate deals falling much further until the Bank of England lowers interest rates."
Amit Patel, adviser at Welling-based mortgage broker, Trinity Finance: "Fixed rates have fallen since the beginning of 2023 and will continue to do so as lenders compete with each other. As soon as a lender announces a rate reduction, within hours a competitor will reprice their offering. If you haven't drawn on your fixed-rate mortgage yet, you might be able to get a cheaper deal. The question now is when will the rate drop below 4% for a two-year or five-year fixed, and which lender will be first out of the blocks. This should boost buyer confidence."
Craig Fish, Managing Director at London-based mortgage broker Lodestone: "We are receiving emails on an almost daily basis announcing rate reductions. When one lender announces a rate reduction, the others tend to follow. The rate war is well and truly on and it's now a race to see who is going to be the first to offer five-year fixed rates below 4%. It isn't, however, relief for those needing a mortgage, because they struggle to decide on fixed or tracker options, especially following the latest base rate increase as the margins are now much tighter. It's a case of trying to educate clients on what may become of the base rate and fixed rates in the future months to ease their confusion and worry, and to guide them to make the right decision for them. Nevertheless, the rate reductions we're getting are a welcome sight and I suspect they will continue for quite some time."
