Could we see competitive 4% mortgage rates soon?

One expert believes competitive 4% mortgage rates could arrive in days or weeks

Could we see competitive 4% mortgage rates soon?

Rate cuts are coming thick and fast at the moment, with Santander and HSBC being among the latest lenders to reduce interest rates below 5%. So, how far could interest rates fall in the short term?

Brokers have offered their views on the trajectory of interest rates, as well as outlining what they are advising their clients at present.

Rate cuts, rate cuts, rate cuts

Elliott Culley (pictured), director at Switch Mortgage Finance, said rate cuts are what everyone wants to see right now.

Culley believes declining interest rates will help improve all areas of the mortgage market and should stimulate growth as well.

The latest inflation figures, he added, were a bit of a shock as the Bank of England was expecting a rise due to the oil increases. Many experts were anticipating consumer price inflation (CPI) to rise to 7%, instead of it dipping slightly from 6.8% to 6.7% in August, which extended the streak of consecutive falls to three months.

“The expected increase did not materialise in the latest reading, and although it may come into play next month, right now the decline is a huge shot in the arm for the mortgage market,” he said.

Positive reactions in the swaps market have followed, Culley said, and, if this continues, he believes competitive 4% rates will be seen in a matter of days or weeks.

“Clients can lock in rates with brokers, which we can then reduce if new rates come out, so it makes sense to lock in now while this plays out,” Culley said.

He believes that, moving forward, tracker rates will become more popular as the market reaches the peak of the base rate cycle.

“Perhaps one more base rate rise will be seen, but, for now, it seems like we may already be at the peak,” Culley said.

A sight to behold

Steven Hargreaves, mortgage and protection adviser at The Mortgage Co, said the wave of interest rate reductions is a welcome sight for buyers and existing customers.

While many lenders have announced sub-5% interest rates, The Mortgage Works, the specialist buy-to-let lending arm of Nationwide building society, kickstarted this trend earlier in the month.

“What we have seen recently is hopefully a sign the economy is starting to get under control, and sending some positivity to all,” he said.

Hargreaves concurred with Culley that he too is encouraging all clients to accept lower rates now while they have the chance, with the intention of switching to even lower rates in the future if the opportunity presents itself.

As property prices have also reduced in recent times, Hargreaves said, with the right interest rate, first-time buyers are aware they can bag themselves a very good purchase.

In the year to August 2023, property prices across the UK have fallen by 4.6%, according to the Halifax house price index. Meanwhile, rental prices skyrocketed 12% in the year to August, which is the largest rise since property broker Hamptons began publishing its letting index.

With interest rates and property prices reducing while rents increase, he said, it will perhaps encourage first-time buyers out of rented accommodation and into homeownership.

“In time, I am sure the rate cuts will provide the confidence this fragile housing market is seeking,” Hargreaves added.

How far are you expecting interest rates to fall in the short term future? Let us know in the comment section below.