The outlook for the UK mortgage market during the last quarter of the year potentially appears more positive than earlier this year, with benefits for those looking to remortgage and for homebuyers.
After much economic uncertainty, mortgage rates are widely predicted to gradually ease as we approach 2025.
Goldman Sachs has predicted that interest rates in the UK will fall to 2.75 per cent by November 2025, very positive news for borrowers and HSBC predict also that the Bank of England could lower interest rates to as low as 2.75% next year. This prediction suggests that HSBC expects rate cuts at every MPC meeting from February 2024 onwards.
The overall trend looks set to be downward, especially given the unexpected drop in UK inflation to 1.7%, its lowest point in over three years. This figure brings inflation below the Bank of England’s 2% target, which is typically a signal for potential interest rate cuts.
Another key rate that has an impact on mortgages is the swap rate. Swap rates are when two parties swap interest rate payments for another. One party agrees to receive a fixed-rate payment, while the other receives a variable payment typically based against government bonds. In the Mortgage industry, it is what lenders pay to financial institutions to enable them to price their fixed rate funding for a set period of time.
Swap rates are impacted by a number of factors:
- Economic factors: GDP growth, inflation rates, and employment figures can influence market sentiment and influence swap rate movements.
- Central Bank Policies: The Bank of England’s actions can impact market expectations on future interest rates, which will in turn affect swap rates.
- Market opinion: World events and investor perceptions of risk can influence swap rates.
Swap rates primarily affect fixed rate mortgages. A higher swap rate leads to a higher mortgage rate. So, while it is impossible to predict future trends with certainty, mortgage rates will likely remain responsive to inflation trends and base rate projections which are then reflected in the swap rates.
Henry Knight from Springtide Capital comments: ‘Keeping a close eye on swap rates as well as the base rate and inflation figures, can help you to navigate the mortgage maze more effectively and help you make a fully informed choice on your mortgage. Let an experienced mortgage broker guide you in this complex area.”
Speak to us today to see how we could help you find the solution that’s right for you.
Contact Springtide Capital on 020 8154 7280
Sources:
Goldman Sachs upgrades Bank rate forecast to hit 2.75% by November 2025 – Mortgage Strategy
https://www.bankofengland.co.uk/monetary-policy/upcoming-mpc-dates