Inflation is expected to dip below the 2 per cent target in coming months following Chancellor Jeremy Hunt’s decision to freeze fuel duty in his Spring Budget, combined with Ofgem’s energy price cap.
Improved sentiment is feeding through to housing market activity with HMRC reporting an increase in transactions in January, although compared with the same time the previous year transaction levels are 11.9 per cent lower. The Bank of England reports that the number of mortgages approved for house purchases, an indicator of future activity in the market, rose by 7.2 per cent in January, while year-on-year that figure was 40.2 per cent higher.
House prices also edged modestly upwards, far preferable to the boom and bust of previous years. Halifax reports that average house prices rose for the fifth consecutive month in February with a 0.4 per cent increase. Growing wages and falling inflation is helping buyers make their move but raising a deposit and affording a sizeable mortgage remains a challenge, which suggests the market is unlikely to run away with itself. Agents report that those sellers who price sensibly are most likely to transact in a timely fashion whereas those who overprice, particularly on blighted property, are likely to find that their property hangs around for longer.
So what does this mean for mortgage pricing? After a promising January where lenders competed to offer the cheapest fixed-rate mortgages and five-year deals dipped below 4 per cent, rising Swap rates, which underpin the pricing of fixed-rate mortgages, have resulted in these being pulled and repriced higher. But with Swap rates falling again in the past week in response to better inflation figures, there are hopes that lenders will follow suit and start reducing their fixed rates again. While it is unlikely that we are going to see dramatic reductions in pricing back to sub-1 per cent levels, we should see more palatable fixes being launched in coming weeks, assuming no more negative data emerges.
SONIA swaps
26 Mar 2024 27 Feb 2024 27 Mar 2023 1 Year 4.807% 4.954% 4.371% 2 Year 4.359% 4.559% 4.084% 3 Year 4.090% 4.313% 3.883% 5 Year 3.802% 4.032% 3.613% 7 Year 3.681% 3.902% 3.428% 10 Year 3.656% 3.868% 3.313% 15 Year 3.706% 3.910% 3.270% 30 Year 3.675% 3.868% 3.124%
As of 27 March 2024
Source: Chatham Financial
