Every Friday we take an overview of the mortgage market with industry experts and round up the best rates with Moneyfactscompare.co.uk.
Swap rates continued to fall this week, potentially signalling that cheaper mortgage rates are in the pipeline.
Swap rates, which determine how much banks and building societies have to pay to borrow money in order to lend, dictate the pricing of fixed-rate mortgages.
They are based on what markets think will happen to interest rates in the future, so when they go up, borrowers ultimately pay more and when they fall, they tend to pay less.
After the two-year swap rate fell back under 4%, we saw some lenders make cuts.
TSB cut some of its rates by up to 0.25%, while Nationwide launched a sub-4% deal, offering borrowers a 3.99% rate on a five year fixed rate at 60% LTV with a £999 fee.
“Rate cuts are always welcome news for borrowers and the broader property market. It’s no surprise to see lenders taking swift action with swap rates heading south,” Steve Humphrey, founder of broker firm The Mortgage Pod, said.
“TSB is one of many lenders to reduce rates this week, and this is positive news for borrowers looking to remortgage or purchase a property. Are we facing a mortgage lender rate war? Let’s hope so.”
More cuts could be coming
Other mortgage brokers think the cuts are a sign that more were coming, even if they are small.
“With lenders jostling for market share and the cost of funds falling, further reductions look likely, especially as the month-end approaches and banks push to meet lending targets,” Jamie Elvin, director at Strive Mortgages, told Newspage.
“Competition is clearly ramping up, and borrowers could be in for even better deals in the weeks ahead. This isn’t just a one-off adjustment, it’s a sign that rates may have further to fall.”
Pete Mugleston, managing director at Online Mortgage Advisor, added: “With swap rates stabilising, we could see further reductions. However, while rates may edge down in the short term, significant cuts are unlikely.
“Instead, we’ll likely see more lenders making incremental cuts to rates as the weeks go on. Borrowers should remain proactive. Waiting too long could mean missing the best deals, as lenders adjust pricing based on demand.”
Away from fixed term mortgage deals, the buy-to-let market saw a mix of reductions and increases over the last couple of weeks.
Positive signs for landlords
HSBC reduced fixed rates by up to 0.2% and NatWest reduced by up to 0.27%. New deals also entered the market for landlords to choose from, such as those from Saffron Building Society and Nottingham Building Society, available to limited companies.
The latest data from Moneyfacts reveals a rise in the choice of buy-to-let mortgages, which now stands at a record high of 3,560 deals.
But, views are mixed on how the buy-to-let market will fare this year.
Rachel Springall, finance expert at Moneyfacts, said those who locked in a cheap deal back in 2020 will be in for a shock when they refinance.
“Landlords will hope rates come down this year, but sticky inflation can delay further base rate cuts, and the swap rate market remains unpredictable,” she said.
“Affordable housing remains in short supply, so demand for rental properties continues. However, rising costs are taking their toll on prospective landlords.”
She explained that data from estate agents Hamptons suggested that the proportion of home purchases by landlords has fallen to a record low of 9.6%, and the margin of profit from rental income is getting tighter.
“Property is still regarded as a safe long-term investment, but both new and existing landlords would be wise to seek advice to assess the latest deals available to them and if it’s still viable to retain their portfolio,” she said.
Here are the lowest buy-to-let mortgage rates available…
Moneyfacts also rounds up what it calls “best buys”, which look beyond the lowest rates and takes in incentives and fees…