Following a press release this morning given by the new Chancellor of the Exchequer Jeremy Hunt, confidence has returned slightly to the market. But many don’t think that this will cause any drop in mortgage rates to occur.
Jeremy Hunt, the newly appointed Chancellor of the Exchequer, announced in a statement today that the government would be taking a complete U-turn on most of the tax cuts announced by his predecessor on a couple of weeks ago. Large tax cuts announced by the former Chancellor Kwasi Kwarteng caused the Bank of England to raise interest rates and sent the UK economy into a downward spiral sending the value of pound plummeting with it.
However, Hunt announced today that more or less every one of the tax cuts announced would not go ahead or would be re-looked at as they are not beneficial for the economy. This announcement has already brought back a lot more confidence to the UK market and the value of the pound has once again increased from the lows of two weeks ago. But, as mortgage brokers, the question that we are really interested in is whether this means any changes to interest rates are on the way.
What Finance Journalists Are Saying About The New Announcement
Kevin Peachey, personal finance correspondent for BBC news said that he thought there was ‘little chance of a sudden drop in mortgage costs’ as a result of Hunt’s latest announcement. Peachey goes on to say:
‘Mortgage rates have been rising – a trend that was accelerated after the mini-budget. But brokers say borrowers should not expect the dismantling of that economic statement to feed through to an immediate reversal. Lenders are likely to play safe, waiting to see how the markets react to the changes, and – critically – what the Bank of England is likely to do with interest rates.
Any lender dropping their rates now could also be inundated with demand. The backdrop is unchanged. Inflation is still high, and the Bank is still expected to tackle that with higher interest rates. Average rates have been unchanged in recent days. Some of that will already be priced in by lenders, so it may be the case that mortgage rates stop rising significantly, but do not drop much, if at all.’
What Do We Think?
Of course, we like all of our clients would like to see rates coming back down but unfortunately, we have to agree with Peachey. Lenders are highly unlikely to make any drastic changes to reducing their interest rates any time soon. It’s just too early to tell how things are going to go and lenders will still be feeling nervous. Peachey is quite right in that if one or two lenders started to reduce rates now, they would definitely be jumping the gun and there would be an influx of people applying causing chaos.
We do expect rates to go down at some point but jumping to conclusions and hoping for a drop in mortgage rates straight away is wishful thinking unfortunately. However, on a positive note, we have already had a lot of our clients contacting us today saying that they feel much better about the economic situation and that they want to proceed with their mortgages. One buyer put things on hold a couple of weeks ago and contacted us today to say that they were happy to proceed.
If you or anyone you know wants to know more about the future of mortgage rates and how a mortgage advisor can help, please feel free to give our advisors a call today to see how we can help.