Mortgage up-date from Purely Financial
Company news : 03 - 05 - 24
An up-date from Andrew Glover, Director of Purely Financial.
It’s certainly been an extremely turbulent couple of years for the mortgage market. In the spring of 2022, base rate was at its all time low of just 0.1% and mortgage rates were in and around 1%. Over the last 24 months we have war breakout in Eastern Europe, leading to an energy crisis and rampant inflation. To add to the already volatile markets that these events created, the infamous 50 day government led by Liz Truss and Kwasi Kwarteng fuelled chaos in the mortgage markets with fixed interest rates peaking at over 6%. Calm is beginning to return to those markets with inflation being hit hard with relentless base rate rises and slowly dropping to 3.2% this month. Forecasts are for a large drop in May and being at, or close to, the Bank of Englands target of 2% by June or July. This should allow the BoE to loosen the purse strings, ease the base rate and begin to build the economy with lower borrowing costs for individuals and businesses. Lenders have been anticipating these reductions and have already started lowering their rates, fixed rates are on offer a full 1% under the current base rate of 5.25%…..not as low as we have been used to but certainly more palatable than the heady heights of 6% only a few months ago.
Predictions are varied but the general view is for base rate to start falling in the 2nd half of this year with 2 or possibly 3 reductions of 0.25%….it does feel that slowly but surely will be the BoE’s mantra here. 2025 should see the reductions continuing and end the year with a base rate of around 4%. This has long been versed as a rate that the BoE see as ‘neutral’….that is to say a rate that should naturally control inflation and also kerb the larger property rises that we experienced when mortgage rates were at record lows. With a base rate of around this level, mortgage rates should also settle at close to this figure, so a little lower than todays offerings. The forecast is therefore for increasingly sunny skies with the odd light cloud.