Mortgage rates are peaking in the wake of ‘mini’ budgets, brokers say

Mortgage rates have peaked and could start to decline in the coming weeks after the UK government made a U-turn on much of its September ‘mini’ budget.

Interest rates on many fixed deals rose to their highest levels since the 2008 financial crisis. This comes after the sale of UK government bonds following his £45bn underfunded tax cut package by former prime minister Kwasi Kwarten.

A sharp rise in government bond yields has forced lenders to withdraw a mortgage For new customers as pricing has gotten harder and many prospective homeowners are vying for a limited number of mortgages.

But a broker on Tuesday said interest rates on fixed deals had “peaked” and lenders would begin cutting rates in the coming weeks. Backlash in the gold leaf market It was triggered by new Prime Minister Jeremy Hunt withdrawing a number of tax cuts.

“Fixed rates will peak this week,” said Ray Bolger, an analyst at mortgage broker John Chercol. is expected,” he said.

Bolger said Hunt’s Oct. 31 announcement of a medium-term debt reduction plan was “important. Yields could fall further if the Prime Minister continues on this track.”

Andrew Monrake, managing director of mortgage broker Koaco, said lenders could cut rates more sharply after the Bank of England’s Monetary Policy Committee voted to raise interest rates in early November. rice field.

“I am cautiously optimistic that the next few weeks will be the peak for fixed rates,” he said. “I think they will stay at this level until November.”

Gold yields fell on Monday and Tuesday, but some lenders have raised interest rates to stem a large number of mortgage applications, Montrake added.

NatWest said Tuesday it was raising interest rates on various mortgages because of “recent application volumes.”

Average two- and five-year fixed rates rose to their highest level since the 2008 financial crisis on Tuesday, according to data provider Moneyfacts. The two-year interest rate reached 6.53% and the five-year interest rate reached 6.36%.

“Maybe weeks or months ago. [a fall] Simon Gammon, Founder and Managing Partner of Knight Frank Finance, said: “We do not expect interest rates to fall dramatically or return to previous levels.”

Cooperative Bank CEO Nick Srap said if the bond market remained stable, prices could fall and users would shop as they considered refinancing their mortgages. rice field.

“If prices are cut, we could lose some of the pipeline as consumers go looking for better rates,” he said.

Rising interest rates are already impacting the housing market, with developers and realtors pointing to signs of weakening demand in recent weeks.

Jason Honeyman, head of FTSE 250 homebuilder Bellway, said on Tuesday that demand for new homes is growing. one third fell in the last few weeks.

He said mortgage rates won’t return to last year’s lows, even after Hunt makes a U-turn on the government’s economic strategy.

According to Moneyfacts, the average rates for 2- and 5-year fixed deals in December 2021 were 2.34% and 2.65% respectively.

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