I hope someone can offer some guidance on this as my husband and I have been going round in circles trying to advise our son and I think we are confusing matters more than helping.
Our eldest son has had an offer accepted on a new build property in North Kent. The developer is quoting a completion date of late April or early May 2026 but has been quite vague about whether that could slip. The purchase price is £310,000 and he has a deposit of £47,000, some of which we are gifting as I have mentioned in a previous thread.
His mortgage broker has offered him a five year fix at 4.19% which can be locked in now and held for six months, so it would still be valid at completion even if there is a slight delay. However, with the rate cut to 3.75% now looking very likely this week and some commentators suggesting another cut could follow in February or March, our son is wondering whether he would be better off waiting and seeing what rates look like in January or February before committing.
The broker has said that fixed rates may not fall much further because lenders have already priced in the December cut, which I gather is the general view on here as well from reading the Bank Rate thread. But I have also seen a couple of articles suggesting that if inflation stays below expectations there could be a more aggressive cutting cycle in early 2026, which might feed through to better fixes by spring.
I suppose the specific questions are:
- Is there any real risk in waiting a few weeks to see what January brings, or is the current offer likely to be as good as it gets for a spring completion?
- If he locks in now and rates do fall before completion, can he typically switch to a better product with the same lender without starting the application again?
- Is there anything specific to new build completions that makes timing the rate lock more complicated?
Thank you very much to anyone who can shed some light. We are very aware that none of us has a crystal ball but any practical experience would be appreciated.
I spent the best part of three months last year trying to time the rate market on a remortgage that never happened, watching the best buy tables shift by 0.05% here and there and convincing myself that next week would be the sweet spot, and all that actually happened was I lost the product I had been offered because it was withdrawn on a Tuesday afternoon with no warning. The six month rate lock is worth its weight in gold for a new build because the completion date is basically a suggestion from the developer rather than a commitment, and if it slips to June and your son has no lock in place he is starting from scratch at whatever the market looks like then. On the second question, most lenders will let you switch to a better product before completion if their rates come down, but it is worth confirming that specifically with the broker because some have a one switch policy and others are more flexible. I would lock in now and treat any improvement between now and spring as a bonus rather than a target.
Thank you, Frankie, that is a very helpful reality check and I have passed it on to our son. He took it better coming from a stranger on the internet than from his parents, which tells you everything about the dynamic!
I noticed this morning that several lenders have already dropped their fixed rates ahead of what everyone seems to expect will be a base rate cut on Thursday. The two year fixes are apparently down to around 4.33% on average now. My question is whether there is any point in our son waiting until after the announcement on Thursday to lock in, or whether the expectation is already fully priced in and he would be better off acting now. The broker mentioned something about lenders sometimes nudging rates back up after a cut is confirmed, which seems counterintuitive but apparently happens. Has anyone seen that pattern before?
The broker is correct that this happens. Lenders price in anticipated cuts before the announcement. If the cut is confirmed at 25 basis points as expected on Thursday, most of the benefit will already be reflected in current product pricing. In several previous cycles, some lenders have actually withdrawn their lowest rate products on the day of the announcement or shortly after, then relaunched at marginally higher rates once the headline coverage has faded. There is no guarantee of further improvement after Thursday. Professional advice on timing is always worth taking.
Thank you, @CGT_Watcher. The cut has now been confirmed this morning as you predicted and I have passed the news on to our son. His broker had already reserved a product last week at 4.19% fixed for five years with Nationwide, which seemed reasonable at the time.
My question now is whether it makes sense for him to hold off and see if anything better appears in January, or whether, as you suggested, this is already reflected in the products available. The completion on the new build is not expected until late March or early April, so there is some time in hand. The broker has said the reservation is valid for 28 days but can be renewed once.
I realise we may be overthinking this but after the past few weeks of going back and forth I would rather we made a decision and stuck with it. Would it be reasonable to lock in now and accept that 4.19% is broadly where the market is, or is there a realistic chance of meaningfully better offers appearing in the new year? Many thanks.