Mortgage rates ‘at a peak’ in wake of mini-Budget, say brokers – Financial Times - 24line

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الثلاثاء، 18 أكتوبر 2022

Mortgage rates ‘at a peak’ in wake of mini-Budget, say brokers – Financial Times

Mortgage rates have reached their peak and could start to come down over the next few weeks following the UK government’s U-turn on much of its September “mini” Budget, brokers said on Tuesday.

Rates on many fixed deals have risen to their highest levels since the 2008 financial crisis, after UK government bonds sold off in the wake of former chancellor Kwasi Kwarteng’s £45bn package of unfunded tax cuts.

The sharp jump in government bond yields forced lenders to withdraw home loans for new customers, as they had become difficult to price, leaving many prospective homeowners scrambling for a limited number of mortgages.

But brokers on Tuesday said rates on fixed deals were “at a peak” and that lenders would start reducing them in the coming weeks, after a rebound in the gilt market sparked by new chancellor Jeremy Hunt’s reversal of many of the tax cuts.

“This week will be the peak for fixed rates,” said Ray Boulger, analyst at mortgage broker John Charcol. “I think they’ll now start to fall. We can expect to see cuts in mortgage rates over the next two to three weeks.”

Boulger added that Hunt’s announcement of a medium-term debt-cutting plan on October 31 would “be important. Provided the chancellor maintains this tone, one can see the potential for yields to fall further.”

Andrew Montlake, managing director of mortgage broker Coreco, said lenders could make more substantial rate cuts after the Bank of England’s Monetary Policy Committee meets to vote on an interest rate rise in early November.

“I would be cautiously optimistic that the next few weeks will be the peak for fixed rates,” he said. “I think they’ll remain at this level until November.”

Montlake added that although gilt yields fell on Monday and Tuesday, some lenders had increased their rates, partly to stem the large number of mortgage applications.

NatWest on Tuesday said it was increasing rates on a range of home loans because of “recent application volumes”.

According to data provider Moneyfacts, the average two-year and five-year fixed rates rose on Tuesday to the highest level since the 2008 financial crisis. Two-year rates reached 6.53 per cent, while five-year rates hit 6.36 per cent.

“It might be a few weeks or a few months before [a fall] comes through,” said Simon Gammon, founder and managing partner of Knight Frank Finance. “We don’t expect a dramatic decline in rates, or seeing them going back to where they were.”

Nick Slape, chief executive of Co-operative Bank, said stability in the bond markets could lead to price drops and users shopping around when considering refinancing mortgages.

“If the pricing reduces, which it might well do, you may find some of the pipeline falling away as consumers go and look for a better rate,” he said.

Higher rates are already affecting the housing market, with developers and estate agents pointing to signs of falling demand in recent weeks.

Jason Honeyman, head of FTSE 250 housebuilder Bellway, said on Tuesday that demand for new homes had fallen by a third in recent weeks.

He said mortgage rates would not return to the low levels they were at last year, even after Hunt’s U-turn on the government’s economic strategy.

The average rates on two-year and five-year fixed deals were 2.34 per cent and 2.65 per cent, respectively, in December 2021, according to Moneyfacts.

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