Could August see the Bank of England cut interest rates and provide much-needed relief for mortgage holders?

Good news for homeowners and aspiring buyers! Mortgage rates are predicted to fall as lenders benefit from cheaper funding options. This follows recent figures revealing a decline in average swap rates – a key factor influencing mortgage interest rates.

Octane Capital, a specialist property lending company, has been closely monitoring average swap rates over 30 and 60-day periods. Their analysis suggests lenders are already positioning themselves for a potential base rate reduction from the Bank of England, anticipated on August 1st.

The UK economy is finally showing positive signs, with inflation falling to the target rate of 2%. This makes an interest rate cut in August highly likely, a year after the Bank of England raised the base rate to 5.25% in August 2023.

Octane Capital’s analysis reveals a downward trend in swap rates:

• Past 30 days: Swap rates decreased by an average of 0.22% daily, compared to a 0.06% daily increase in the preceding 30 days.
• Past 60 days: Swap rates fell by an average of 0.08% daily, in contrast to a 0.13% daily rise over the previous 60 days.

Jonathan Samuels, CEO of Octane Capital, commented:

“With inflation finally aligning with the Bank of England’s 2% target rate, there’s a strong possibility of an interest rate cut in August, marking a year since they reached their peak of 5.25%. We are already observing a decline in swap rates in anticipation of this potential base rate reduction, a trend we expect to continue as the Bank of England’s decision draws nearer. This development will be welcomed by mortgage holders who have experienced significant increases in repayment costs. It will also be encouraging for potential buyers who have had to reassess their options due to higher borrowing costs.”

This positive shift in the mortgage landscape could offer some relief to those feeling the squeeze of the cost of living crisis. However, it remains to be seen how substantial the rate cuts will be and how quickly they will be passed on to borrowers.