With two of the biggest lenders announcing rate reductions for new purchases and those remortgaging, hopes are rising that other lenders will follow suit. Barclays and HSBC reduced a number of mortgages after lower Swap rates, which underpin the pricing of fixed-rate mortgages, gave them more leeway to cut rates. While mortgages may not be as cheap as they were at the start of the year, five-year fixes are now available from less than 4.5 per cent, while two-year fixes start from just over 4.5 per cent.

Hopes of an interest rate reduction were raised by inflation falling sharply in April to 2.3 per cent, its lowest level for nearly three years, signalling an end to the cost-of-living crisis. While this is good news, taking inflation closer to the Bank of England’s 2 per cent target, the reduction wasn’t quite as great as the markets had forecast, even though it was a significant drop from March’s 3.2 per cent. Market forecasts had expected April’s consumer prices index to come in at 2.1 per cent.

The smaller-than-expected drop means expectations that the Bank of England will cut rates from a 15-year high of 5.25 per cent at the next meeting in June have been scaled back, although there is another month of inflation data due before that meeting. Analysts are now leaning towards the first easing in rates coming in August, by which time a new government will have been elected.

SONIA swaps
22 May 2024 23 Apr 2024 23 May 2023
1 Year 4.959% 4.878% 4.891%
2 Year 4.628% 4.559% 4.696%
3 Year 4.368% 4.337% 4.512%
5 Year 4.059% 4.059% 4.257%
7 Year 3.926% 3.940% 4.096%
10 Year 3.891% 3.915% 4.000%
15 Year 3.936% 3.964% 3.969%
30 Year 3.894% 3.929% 3.843%

As of 22 May 2024
Source: Chatham Financial

When the first base rate reduction does come, it will provide a welcome boost for the housing market. As it is, the market is enjoying a spring bounce with agents reporting an increase in new enquiries and stock for sale. Sellers are feeling optimistic, with the average asking price up 1.3 per cent compared with last year, hitting a near-record high, according to Right move. The portal puts this down to pent-up demand from buyers who put their plans on hold because of higher mortgage rates, and are now making their move in the belief that rates have peaked and the next move will be downwards.

With the Office for National Statistics reporting that the average UK house price is £5,000 higher than 12 months ago, this suggests a gentle uptick in values, rather than the boom and bust of old. Whether the impending general election will slow things down or not remains to be seen, particularly as the prospect of a Labour Government come the autumn seems the most likely outcome. There is a perception that those at the upper echelons of the property market may have more to worry about than those further down the rungs, particularly those who are non-domiciled, but time will tell.

Best buy remortgage rates (60% loan-to-value)
Rate                Type 4.65%              two-year fix
4.49%              three-year fix
4.31%              five-year fix
4.78%              10-year fix

Source: Moneyfacts

If you are planning on taking out a mortgage or remortgaging this year, it is important to seek advice. AWS Private Finance is a whole-of-market broker who will look for the best mortgage for your circumstances, comparing all the products on the market. Products can be reserved up to six months before you need them, giving you peace of mind in case rates were to edge up further. Please get in touch for more information.