In his most recent blog post Ray Boulger, one of the most respected commentators on the mortgage, said that it would have been a surprise if the Bank of England had announced an increase in the interest rate at its most recent meeting. In fact, the vote for a rise moved from 5-3 against to 6-2 against, although this was because a member of the monetary policy committee who had previously favoured higher rates had stepped down.
The Bank’s decision was also accompanied by an update of the country’s economic prospects. “GDP growth is now forecast to be only 1.7 per cent this year, compared to the previous forecast of 1.9 per cent and it has also nudged down its 2018 forecast,” said Boulger. “The Consumer Prices Index forecast [of inflation]is virtually unchanged, with the Bank still expecting it to peak at about 3 per cent in October; it’s currently 2.6 per cent. Despite not expecting a rate increase the market was expecting a more hawkish tone and so the gilt market reacted positively, with the 5 year yield falling 7 basis points to 0.52 per cent and the 10 year by 9 basis points to 1.15 per cent.
Swap rates, which are a good indicator of interest-rate moves, “will react similarly and although these yields are still above levels before the previous MPC meeting about half of the increase on the back of that meeting has now been recouped”, said Boulger.
The good news out of all that, he says, is that it will take pressure off any lenders that were thinking about putting up the cost of fixed-rate loans “and provide a little more scope for those who want to boost volumes by competing on price rather than criteria” and “the cost of funds is unlikely to change much in the short term”.
Even better news comes from Moneyfacts, the financial information provider, which says that the number of mortgage deals on the market has increased by 53 in the past month, to 4,657. Charlotte Nelson, finance expert at Moneyfacts, said: “Since April 2009, when the number of products on the mortgage market hit an all-time low of 1,209, the residential mortgage market has seen product numbers grow substantially.”
She adds that recent boost is driven by several lenders launching three-year fixed rate products, which rose by 48 deals in the past month alone.
“The talk of an impending Base Rate rise means that borrowers are starting to look at their options to protect themselves from a potential rise in monthly repayments,” explained Nelson. ”
More competition should mean more choice and, with any luck, cheaper deals.