Mortgage rates are “highly likely” to drop below the current market leading rate of 3.51 per cent in 2026 as the mortgage price war rages, according to brokers.
Lodestone director, Craig Fish, suggested over the coming days and weeks there will be many reductions as lenders are currently engaged in a “rate war”.
As a result, he speculated that rates will fall below 3.51 per cent at some point in the new year.
However, Orchard Financial Advisers managing director, Ben Perks, went further, predicting the market will see a sub 3.5 per cent rate before the year is out.
A similar sentiment was expressed NG Mortgages mortgage adviser, Nick Gatti, who stated that the flurry of rate cuts recently means that the mortgage price war is “100 per cent official”.
Gatti attributed this to a “perfect storm” of two major factors, swap rates and the lack of volume.
He explained that, in regards to Swap rates, markets expect the Bank of England to cut the base rate on December 18 to 3.75 per cent.
“That’s lowered funding costs for two and five-year mortgages, so lenders are already pricing it in and can afford to be more competitive in what they offer consumers,” he stated.
The second factor, the lack of approval, comes from data from the Bank of England which showed that mortgage approvals for house purchases fell in October and remortgage approvals hit their lowest level since February.
“This all means less demand and so lenders need to be more competitive to hit their targets,” Gatti detailed.
As a result, Gatti suggested that the mortgage market could see deals better than the current market leading rate of 3.51 per cent, offered by Santander, in the new year.
Housebuilding
Additionally, Barnsdale Financial Management suggested that the housebuilding process not being mentioned in the Budget represents good news for the market.
“Following the Budget and the end of the whole ‘will they, won’t they’ debate that always precedes any financial statement from the government, the money markets have been able to understand the next few months and better project what they feel will be the outlook for UK,” he said.
“On top of that, the relatively benign Budget, with no radical moves in any direction, has given markets the context with which to view the rest of the economic data.
“This downward sentiment has then fed into Swap rates, which in turn has meant lenders have been able to reduce their fixed rate offerings.”
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