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It is the mortgage equivalent of the Boxing Day sales, and it has arrived in October. Only a few months ago lenders started raising their rates in anticipation of a Bank of England interest rate rise; now, with lenders pushing to meet year-end targets, about of fixed-rate mortgage cuts has arrived.
Fixed-rate mortgages have been popular in recent years with homebuyers looking to capitalise on low rates and dodge the effects of the dreaded base rate rise, whenever it materialises. According to the Bank of England, almost 80% of mortgage borrowing in the UK is at fixed rates.
In general, banks and building societies have been in good spirits this year. In April, mortgage approvals jumped by the largest monthly amount in more than six years from 61,945 to 68,076. In July, the number of mortgage approvals was up 4.8% from 2014 to 67,900, according to the Council of Mortgage Lenders. This was the third consecutive month-on-month increase.
A gloomier economic picture, ushered in by crises in China and Greece, has pushed forecasts for the Bank of England hike back and we’ve seen a number of top deals creep back onto the market. Another reason for the cuts is that the cost of funding fixed rates for lenders has fallen; five-year swap rates have slipped from 1.86% in June to 1.39% as of 5 October.
Besides, time flies when you’re having fun; 2015 is drawing on apace, and there are year-end targets to be met. In a competitive market, lenders are having to work harder to attract borrowers faced with more choice than ever before.
The first shots have been fired, and some in the property industry are forecasting full-blown warfare over the next couple of months. Islay Robinson, CEO of Enness Private Clients, predicts yet more cuts: ‘We are expecting further drops in fixed mortgage rates by the end of the year. Lenders have one eye on 2015 lending targets, which they are yet to meet in spite of a rush from borrowers to fix rates ahead of any bank rate hikes.’
High street lenders from Tesco Bank to Yorkshire Building Society are unveiling cuts left right and centre. HSBC has been promoting its five-year fixed rate at 2.19%, the lowest on the market; Nationwide is reducing rates across its range by up to 0.45%.
As part of a series of reductions, Chelsea Building Society has just announced the launch of a two-year fixed-rate, charging 1.82% up to 85% loan to value. Brendan Gilligan, product manager at CBS, says: ‘We have a range of products that come with incentives and no product fee which could be beneficial for those looking to save on upfront costs.’
In short, at Enness we know that there’s an awful lot of choice, and the timing could be key. As Mr Robinson says, ‘We are seeing more and more lenders forced to cut their rates in order to compete in the fixed-rate market. Consumers who are willing to wait a little longer before fixing can take advantage of this race to the line.’ The only way to ensure access to the best possible deals and impartial advice – without getting caught in the crossfire of fixed-rate mortgage warfare – is to get in touch with a broker.
At Enness we can offer a whole market perspective and are more than happy to talk you through your options. Please don’t hesitate to get in touch for a free and personal consultation.