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.

  • 3-, 5- and 10-year fixed rates on parity
  • Demand in the market remains strong, but some potential buyers becoming fearful
  • Speed and regularity of rate rises creating difficulties for brokers

3-, 5- and 10-year fixed rates on parity

We continue to see fixed rates creeping up on a weekly basis. This comes as no surprise with a potential further increase to the base rate due on 17th March. What is interesting however, is the fact that the best available 3-, 5- and 10-year fixed rates are now on parity at around the 1.68% mark. Moreover, these rates are only 0.19% above the best available 2-year fixed. We have even seen some lenders offering more competitive 5-year fixed rates now then their 2-year offerings!

  • While this is quite remarkable, it makes perfect sense for lenders. The current SONIA swap rate on a 10-year tenor is lower than that of a 2-year and thus the rate itself is only higher because lenders are factoring in an increased margin for the increased risk of a longer term lend. Moreover, lenders are becoming increasingly competitive on longer term products given the paradigm shift in the interest rate environment, moving from one in consistent decline to one that is consistently increasing. A client on a 10-year term is far more profitable for lenders and gives them longer term secured incomes, and for consumers it makes sense for them to choose a longer term at present given the market conditions – in fact, it could very much be the case that those taking these highly competitive 10-year rates now will be paying less interest than the base rate during the term of their mortgage.

Demand in the market remains strong, but some potential buyers becoming fearful

It has been a very busy start to the year for us and February this year, in terms of case numbers, has significantly exceeded 2021 by over 30% – quite remarkable given the fact there was the SDLT holiday deadline driving purchases last year. We suspect this is down to the changing interest rate environment and borrowers looking to remortgage and purchase now to lock in lower rates. However, despite the very rosy outlook, economic woes, and the spectre of conflict in Europe means that some buyers are becoming fearful and are holding off on bigger purchases. For instance, we had a client this week pull out of a £3m finance facility against £5m of properties (one current one a purchase) as they were concerned about the economy and the impact of the war in Ukraine in general and on their investment portfolio.

  • The war in Ukraine is already impacting energy prices in the UK further pushing up inflation and large UK companies that form an important part of pension funds and the like, like BP have taken a hit as they seek to rid themselves of Russian assets. All of this, in combination with tax rises, wages not rising in line with inflation, the cost-of living crisis in general and the broader threat of the conflict in Ukraine does create fear and uncertainty which will of course impact on people’s decision to make larger purchases. The size of a purchase is of course subjective and thus we suspect we will see an impact across the market. There is a continuing disconnect between house prices and the state of the economy and as our client elaborated, even a 5% fall on £5m of property would be a significant loss.

Speed and regularity of rate rises creating difficulties for brokers

We are seeing consistent rate rises from lenders across the board, with NatWest, HSBS, Accord and Halifax the latest in the last couple of days and while this is not abnormal, the frequency of these rises and the fact they are happening across the board creates difficulties and means we need to work at a much faster pace with clients to submit applications.

  • For instance, we quoted a client at 9:30am yesterday morning, but received an email from a major lender at 10am saying rates are increasing tonight, unfortunately this impacted on both products in the quote and given the fact the next best alternative is around £4k more expensive for the client over the 5-year fixed we had to rush the client to get documents together and work through the evening to submit the clients application before midnight. Another example was an email from another major lender at 16.30pm yesterday informing us that rates were rising at midnight that night, given us 7 and a half hours to get documents together from clients and applications submitted, if possible, in the time frame.
  • Some lenders, like Coventry for example, have a pledge to brokers that they will always give 2 days’ notice of a change and with others it is almost immediate. We would suggest that clients get documents together ASAP when making offers on properties in order so we can submit applications as quickly as possible, so they do not miss out given the current market.
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