Mortgage rates are falling as experts predict the Bank of England will soon slash interest rates.
Coventry Building Society is the latest lender to announce it’s cutting rates on some fixed-rate mortgages. This comes hot on the heels of similar moves by high-street giants HSBC, NatWest and Barclays.
These cuts will be a welcome relief for borrowers who have seen mortgage rates climb dramatically over the last year. And experts believe even more lenders will cut rates in the coming weeks.
So, why are mortgage rates falling now?
One of the main reasons is that “swap rates” have stabilised. Swap rates are used by lenders to price fixed-rate mortgages. They are based on predictions about what will happen to the Bank of England’s base rate in the future.
The Bank of England’s base rate is the interest rate it charges commercial banks to borrow money. This has a knock-on effect on the rates those banks charge their customers.
Last week, the Bank of England voted to keep the base rate on hold at 5.25%. But many analysts believe the Bank will cut rates in August to help control inflation. This prediction has caused swap rates to fall in recent weeks.
Since 7 May, swap rates have been holding steady at 5.2%. This is the longest stable period since records began in 1997.
This stability has given lenders the confidence to start cutting their fixed-rate deals.
What does this mean for you?
If you’re thinking of buying a home or remortgaging, now could be a good time to bag a bargain.
However, experts warn that rates could rise again if the Bank of England decides not to cut the base rate in August.
Rachel Springall, a finance expert at Moneyfacts, said: “It is likely borrowers will wish to see more lenders step up to slash fixed rates, but it might be too soon to see a flood of rate cuts. It can take a couple of weeks for lenders to price in swap rate volatility, so borrowers may have to be patient.”
“Even if there are growing expectations for the Bank of England to cut the base rate in August, some of the biggest lenders may hold tight on making notable cuts in anticipation until their peers make a move.”
What to do next
If you’re considering taking out a mortgage, it’s important to compare deals from a range of lenders to find the best rate. You can use a mortgage broker to help you with this.