Genuine question. Moneyfacts average two year fix now at 5.67%. Five year fix at 5.69%. That is a full 80 basis points higher than the start of March.
Who is signing up for this. First time buyers priced out. Remortgagers panicking. Anyone with a tracker probably sitting tight. The approval numbers tell one story but I suspect a lot of those March approvals were people rushing to lock in before rates climbed further.
I posted a few days ago about my own fix ending in August. I was being offered 5.38% and thought that was rough. Now 5.38% looks like a bargain. The base rate has not moved since April. This is entirely swap rate driven.
At what point do lenders just stop lending because nobody wants to borrow at these prices. Or do people just accept it and pay.
The 51,300 remortgage approvals in March rather answers your question. People are borrowing at these rates because they believe the alternative is worse. Whether they are right is another matter. The Middle East situation has essentially killed off any prospect of a base rate cut this year, and swap rates are pricing in the possibility of a hold well into 2027 if inflation stays above 3%. The MPC statement last week was notably less dovish than the one in February. I would not be surprised to see five year fixes above 6% by the summer if things deteriorate further. Lenders will not stop lending, they will just tighten criteria and widen margins. The people who get squeezed are the ones at the edge of affordability, which increasingly means anyone trying to buy a family home on a single income. That said, from recollection the rates in 2023 were briefly above 6.5% for a two year fix and the market did not collapse, it just slowed down considerably.
@GrumpyLandlord47 spot on there.. people don’t take out mortgages at 5.67% because they think it’s a good deal. They do it because the alternative is the SVR at 7 point something or losing the purchase entirely.
Just refinanced one of my Scottish flats last month at 5.48% on a two year fix. Felt physically painful signing that when I remember locking in at 1.89% in 2021!! But what’s the alternative.. SVR of 7.24% and bleeding cash every month while waiting for rates that might never come back down.
The thing that really gets me is the spread. Base rate at 3.75%, mortgage rate at 5.67%. That’s nearly 200 basis points. Go back to 2019 and the spread was more like 100-120bps. Lenders are absolutely coining it and nobody seems to be calling them on it. The MPC holds rates and somehow mortgage rates go UP?? Make it make sense..
Cheers!
Me, apparently. Locked in at 5.31% on a two year fix back in April for the place i’m buying and at the time the broker was saying that was a decent deal given where things were heading. Six weeks later lenders are cutting and i’m sat here wondering if i’d have got something in the high 4s by waiting. The answer is probably yes but you can’t time these things (or so everyone keeps telling me). The whole market feels like a casino at the moment, swap rates jumping around on whatever geopolitical news drops that week. tbh i think most people taking out mortgages right now aren’t doing it because they think the rate is good, they’re doing it because they need somewhere to live and the alternative is renting at equally stupid prices.
@Trombone_Felix don’t beat yourself up over 5.31%.. that’s not a bad deal in the current mess. People forget that when I bought my first BTL in 1998 the rate was north of 7% and nobody batted an eyelid. We had a decade of cheap money and now everyone thinks 3% is normal and 5% is an outrage.
The real question isn’t who’s borrowing at 5.67%, it’s who ISN’T borrowing at 5.67%.. and the answer is people who can afford to wait. Most can’t. You’ve got six month mortgage offers expiring, chains collapsing if someone pulls out, FTBs losing their rental and needing to move. Nobody signs up at these rates because they’re happy about it. They sign up because the alternative is worse (sitting on SVR at 7 point something) or because life doesn’t pause while you wait for the MPC to do something useful.
That said.. if the BoE does hike later this year as hinted, 5.31% might look like a bargain by Christmas. Obviously.
Appreciate the reassurance @theartfulfreeholder but seeing the news that Nationwide and HSBC have been cutting rates this week is a bit painful tbh. My broker reckons the two year fixes could drift back below 5% by summer if the lenders keep going. Which would mean i locked in at the worst possible moment (April, naturally). The product transfer window doesn’t open for another 18 months so i’m stuck with it. Does anyone know if there’s any mechanism to renegotiate a rate mid-fix or is that just not a thing? Suspect i know the answer already.
No. Youre locked in, thats the deal. You could pay the early repayment charge and remortgage but at 5.31% on a two year fix the ERC would wipe out any saving unless rates dropped to about 4%. Not happening. Stop watching the rates and get on with it.
@rb471956 yeah i know the ERC makes it pointless in practice. Just frustrating watching Nationwide and HSBC cut their two year fixes to around 4.8% this week when i locked in at 5.31% barely six weeks ago. My broker is saying the product was withdrawn and replaced with the lower rate version so there’s nothing they can do, it’s a new product not a repricing of the old one. Does anyone know if any lenders let you switch to a lower rate within the same product range before completion without treating it as a new application? I’ve heard some do but i can’t find anything concrete. Aware that i’m probably clutching at straws here but half a percent over two years on 280k is not nothing.
Stop watching rates. Youve locked in. Checking what you could have got is just making yourself miserable for no reason.