A series of mortgage rate cuts from lenders this week has sparked optimism among brokers that the market is edging closer to sub-4% rates.
Several high street and specialist lenders have reduced residential and buy-to-let pricing in recent days, with Accord Mortgages, Precise and ModaMortgages among those announcing cuts this morning.
Aaron Strutt, product and communications director at Trinity Financial, believes there is a growing possibility of sub-4% mortgage rates returning this year.
He said: “It seems like there is a fair chance we will see sub-4% rates again this year assuming there are no more wars and the hand over to the new prime minister goes smoothly.
“The Bank of England’s MPC do not seem particularly keen to raise the base rate unless they really have to because they know the UK economy is nowhere near as strong as it needs to be and pushing up borrowing costs will just put the brakes on economic growth even more.
“Sub-4% mortgages would send a signal that rates are getting cheaper and the economy is hopefully more stable.”
The latest Moneyfacts data shows the average two- and five-year fixed rates now sit at 5.51%, down from 5.67% and 5.62% last month, and well below the start of April when they stood at 5.90% and 5.78% respectively.
COMPETITION HEATING UP
Strutt added: “It is fair to say that higher mortgage rates are not great for business, they are also not great for home buyers or the property market in general.
“People don’t want to pay closer to 5% or more, especially as they often need fairly chunky mortgages to buy the properties they want.
“The cheapest fixes start from 4.19% now and the lenders are improving their rates all the time. This good news may well start filtering through to borrowers soon.”
Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau, said recent back-to-back rate reductions from Santander, Barclays and NatWest were a clear sign that competition in the mortgage market is gathering pace.
“For first-time-buyers, lower rates could help ease affordability pressures. This is welcome news, especially as our research found that 45% of aspiring homeowners cite property prices as the main barrier.
“Remortgage customers will benefit from the wider choice of products, while those moving home could also see lower borrowing costs, making it easier to take that next step.
“Although these reductions won’t transform affordability overnight, they add to the momentum we’ve seen in recent weeks as lenders compete more aggressively for business.”
