Swap rates have reduced
Recent research from Octane Capital has revealed a promising forecast for mortgage rates in the UK. The study, which analysed average swap rates over 30 and 60-day periods, indicates that swap rates have started to decline. This shift could herald a significant improvement in homebuyer affordability as the market anticipates a potential base rate reduction from the Bank of England on the 1st of August. In this article I am going to explore the question ‘What are swap rates’, what they mean to homebuyers and mortgage brokers, and why these newly released figures are so important.
What Are Swap Rates?
Swap rates, crucial in the mortgage market, are essentially the interest rates at which financial institutions exchange fixed-rate payments for floating-rate payments over a specified period. These rates are pivotal for setting mortgage rates as they reflect the cost of borrowing between banks. When swap rates decrease, the cost for banks to lend money also declines, which can lead to lower mortgage rates for consumers.
Mortgage Swap Rates UK Dropping – A Positive Step?
The recent data from Octane Capital shows a notable trend: over the past 30 days, swap rates have declined at an average daily rate of -0.22%. This is a stark contrast to the 30 days prior, where swap rates increased at an average daily rate of 0.06%. Looking at a broader timeframe, the last 60 days saw swap rates fall by an average of -0.08% daily, compared to an average daily increase of 0.13% in the preceding 60 days. In my opinion, the downward trend in rates suggests a potential easing of mortgage costs in the near future. Although we have seen red herrings like this before, and no one can predict the future and the curveballs it presents!
The UK Economic Outlook
According to Octane Capital’s research and broader economic research, the UK’s economic landscape is also showing signs of improvement. Inflation has finally hit the target rate of 2%, paving the way for a possible interest rate cut by the Bank of England. A reduction in the base rate, which has remained at a peak of 5.25% since August 2023, is widely anticipated by financial experts. This expected cut could provide much-needed relief to homebuyers and mortgage holders alike. We at Oportfolio tend to agree!
Expert Opinion On UK Mortgage Swap Rates
My managing director here at Oportfolio Mortgages, Oliver Whitehead has this to say about the recent exciting news on swap rates:
“The recent decline in swap rates is a highly encouraging development for the mortgage market and homebuyers. If this trend continues and the Bank of England follows through with a base rate reduction, we could see a significant boost in affordability for prospective homeowners. This would be a welcome change, especially given the challenging economic conditions of the past year.”
Mortgage Lenders Reducing Rates
The mortgage sector is already reacting in anticipation of the base rate cut, with lenders likely to adjust their offerings to reflect the lower cost of borrowing. This could translate into more competitive mortgage rates, making homeownership more accessible for many. Earlier this week Nationwide was the first mainstream mortgage lender to lower some of their rates below 4%, a huge shift in the market. Many other lenders are already dropping their rates too. As we approach the 1st of August, all eyes will be on the Bank of England’s decision. If the base rate is indeed reduced, it could mark a turning point for the housing market, offering a brighter outlook for homebuyers across the UK. The decline in swap rates is a positive signal, suggesting that better times may be ahead for those looking to step onto the property ladder.
Speak To A Mortgage Expert
If you or anyone else you know is considering getting a mortgage in 2024 or beyond, but don’t quite know where to start. Please feel free to give us a call at Oportfolio. We are mortgage experts with years of experience in getting the most competitive and beneficial mortgage products for our clients. Call or email our team of advisors today for a fee free initial mortgage consultation.
