The mortgage market may see “sub 3 per cent rates” by the end of the year, according to some brokers.
Montgomery Financial founder, Charles Breen has predicted the drop in rates will be driven by “regular interest rate cuts” in the latter half of the year.
Breen was not alone with this prediction as Staton Mortgages director, Mike Staton, stated that fixed rates should reach “late 2 per cent to mid 3 per cent” by the end of the year.
These predictions follow a number of recent rate reductions from a number of different lenders, including HSBC which became the first major lender to offer sub 4 per cent rates.
These reductions may act as catalysts for more rate cuts across the market, according to Alfa Mortgages founder, Adam Smith, who said it seemed “increasingly likely” there will be widespread reductions to “maintain competitiveness”.
“There may even be bold moves by some venturing below the 4 per cent threshold to compete with institutions like HSBC,” he explained.
This sentiment was shared by Peak Mortgages and Protection brand director, Rhys Schofield, who said: “It certainly feels like where HSBC go, others follow.”
Rate slowdown
However, Barnsdale Financial Management principal adviser, Scott Taylor-Barr, cautioned that, while the current crop of reductions are “great”, there will be a limit.
He explained fixed rate mortgages are based on swap rates and that, currently, swap rates for all periods are “edging closer” to 3 per cent and that has drived the falls in interest rates for consumers.
“We’ll see the fall in rates slow as we see swap rates get close to that 3 per cent level,” he added.
Additionally, Yellow Brick Mortgages managing director, Stephen Perkins, said in the short term he expected a “flurry of rate reductions” as lenders aim to “ensure they don’t have another poor year like 2023”.
However, Perkins acknowledged these rate reductions will become “more static” until base rate reductions follow later in the year.
Meanwhile, Shaw Financial Services owner and mortgage expert, Lewis Shaw, stated: “It’s nailed on that, within the next few weeks, we’ll see a raft of lenders cutting their rates.”
Shaw attributed this practice to the cost of funding reducing and lenders wishing to get a head start on their annual lending figures.
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tom.dunstan@ft.com
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