Homeowners have been left facing mortgage “uncertainty” after some lenders cut rates and others upped them in a confusing 24 hours for the market.
On Wednesday morning, most brokers warned homeowners not to expect cuts to fixed rate mortgages after inflation in the year to April was recorded as higher-than-expected at 2.3 per cent.
Now, some major banks have cut their rates, but others have also increased them, creating “mixed signals” as to which direction the market is going in.
Experts have warned that with a general election now being called for 4 July, rates “could swing either way” in the coming weeks and that homeowners should expect a “rollercoaster of rate adjustments as everyone tries to make sense of the political and economic landscape”.
On Wednesday, Britain’s biggest mortgage lender, Halifax, announced rate reductions of up to 0.19 per cent on two-year and five-year fixed rate products.
TSB has also announced it will be reducing rates by up to 0.4 per cent from Friday.
But Barclays, which currently offers some of the cheapest rates on the market, has announced that it will cut some rates, but increase others. Several of its remortgage products and mortgages for home buyers will go up by 0.25 per cent.
Aaron Strutt of Trinity Financial told i: “The mortgage market is crying out for a period of rate stability, but this seems unlikely for a while, particularly with the election looming.”
Simon Bridgland, a broker at Release Freedom, said: “The news of the general election and higher than hoped for inflation figures has for the moment caused confliction in the mortgage market. The movements of rates being offered so far seem to show lenders in a bit of a spin as to what to do.”
Samuel Mather-Holgate, an independent financial adviser at Mather and Murray Financial, said: “Lenders are as confused as economists, with expectations of rate cuts between zero and three moves this year.”
And Dariusz Karpowicz, director at Albion Financial Advice, added: “Depending on what politicians cook up, rates could swing either way. Let’s hope they whip up some good promises for the property and mortgage sector. In the coming weeks, expect a rollercoaster of rate adjustments as everyone tries to make sense of the political and economic landscape.”
According to financial analytics firm Moneyfacts, the average two-year mortgage deal is 5.93 per cent, and for five-year deals the number is 5.5 per cent.
Rates were lower than this at the start of 2024. On 22 January, the average two-year rate was 5.59 per cent and the average five-year fixed mortgage rate was 5.22 per cent, as economists expected inflation to fall faster than it has done and expected multiple rate cuts throughout the year as a result.
Now, economists are leaning towards saying that rate cuts won’t come until August at the earliest.
How to navigate the mortgage market turbulence
Though turbulence in the mortgage market is making it difficult to plot your next move, if you’re remortgaging or moving home, there are things you can do to ensure you pay as little as possible.
- If you see a good rate, act quickly. Brokers are warning that it is difficult to foresee whether rates will go up or down in the near future, and so if you see a good rate, it’s worth acting quickly. Rates are often pulled with only a day or so’s notice. “If you see a rate that you think looks like a fairly got option, then it is worth securing it,” says Aaron Strutt of Trinity Financial
- Mortgage expiring later this year? Lock in a deal now. If your mortgage deal is expiring later in 2024, it’s probable you will pay a higher rate once you have renewed. This is because the deals on offer at the moment are far higher than they were during the pandemic period and prior. Most lenders allow customers to lock in rates six months in advance. If mortgage deals then improve in that period, you can always switch to a new, cheaper one, so it’s a win-win.
- If at all possible, up your deposit or equity. The best mortgage deals are generally available to those with large amounts of equity – 40 per cent or more – in their property. If you have the cash, it’s always best to try and use it to increase your deposit, as this will help you to unlock these cheaper rates.
