Private Finance Morgage Memo

This is our take on what is currently happening in the mortgage market. Our views
are often cited in several national publications, including; BBC News, The
Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of
key trade publications, so this should keep you ahead of the curve. If you have
any questions on any of these stories, or would like further information,
please do not hesitate to get in touch.

  • Swap rates dropping and some rate reductions, but banks have little incentive to reduce rates
  • Buy-to-let lenders favour tracker rates in uncertain times

Swap rates dropping and some rate reductions, but banks have little incentive to reduce rates

Despite swap rates falling since the sharp increases last month/earlier this month in response to the economic turmoil, fixed rates weren’t appearing to budge however we are starting to see a couple of rate reductions in the last few days from Accord, HSBC, Coventry with a new introduction of rates, and we suspect a few others will follow, albeit very very slowly reacting to demand levels.

Rate decreases by lenders is always a gradual thing, and lenders will always be more responsive in increasing their rates rather than reducing. It is promising to start to see some lenders reducing their fixed rate products. Many lenders will be waiting to see what the Bank of England will do with the Base Rate at the next MPC meeting on the 3rd of November and how this will impact the Swap Rate market.

Tracker rates

Tracker products may be more attractive right now for some people if they are able to take on the risk of it all. Perhaps some borrowers will find it more beneficial to take on a tracker product initially and then fix their mortgage later once rates decrease, if they took a tracker with no early repayment charges.

What is keeping rates from falling?

Lender service levels have played a large role in pricing fixed rate products in the present circumstances. When considering the increasing rate environment, many customers are driven more by receiving the best rate rather than the best service. If a bank were to reduce their rate and become more competitive, they may become inundated with demand and unable to service new and existing clients.

Additionally, we are approaching the end of the year and many lenders will have already lent more that they have budgeted for or needed to budget for. It is possible that banks have reached or surpassed their lending targets for the year and may need to slow down, especially when taking service levels into account.

Buy-to-let lenders favour tracker rates in uncertain times


Recently we have noticed that buy-to-let lenders are favouring tracker products more while the wider economy and lending environment remains uncertain. This makes sense given the rates move in line with market conditions, sometimes caps are put on also, so the rate will not fall below a certain percentage over time.

Two lenders, Fleet Mortgages and CHL, released Lifetime tracker for term products recently. These are products are superb as they stress similar to fixed rate products and come start at 1.65% + Base so a fantastic rate compared to the 6.5-7.5% we are often seeing on fixed rates in the specialist lending market. This is a fantastic option for some landlords who want to have long term rates and don’t want to incur the costs of refinance every few years. Additionally Fleets has the advantage of a short tie in only until mid – next year so if the landlord wanted to sell or change to a fixed they also have flexibility

As tracker rates follow the Bank of England base rate, these are much easier to price accurately, however whether they will increase soon will depend on the Bank of England’s decision on the Base Rate next week.

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