Investors will be delighted that there have been so many mortgage rate drops announced by major lenders last week – Nationwide actually taking a five year fix to under 4% and the likes of Barclays And TSB announcing major cuts too.

Mortgage experts say this could be just the start of things to come, whatever happens at Thursday’s meeting of the Bank of England’s monetary policy committee. They spoke to news agency Newspage to produce this summary:

Andrew Montlake, managing director at Coreco: “It’s life by a thousand cuts for the mortgage market. Rarely a day goes by without a number of lenders shaving their rates further. Nationwide going sub-4% was a symbolic moment and more lenders are likely to follow suit. Lenders seem to be pricing in the fact that a base rate cut is coming very soon.”

Hannah Bashford, director at Model Financial Solutions: “Rate reductions are seriously picking up pace with multiple lenders adjusting their offerings on a daily basis. It’s only a matter of time before we see more products under that all-important 4%. More mortgages going sub-4% has the potential to supercharge demand during the rest of 2024.”

Rohit Kohli, director at The Mortgage Stop: “These reductions will always be welcome news, but we need lenders to do more at higher loan-to-value levels to help first-time buyers. Lenders are focusing on those with higher equity and are still being cautious when it comes to borrowers with smaller deposits. First-time buyers need to be front of mind to get the property market moving.”

Justin Moy, managing director at EHF Mortgages: “These rate cuts are the ideal tonic for borrowers, and will only give confidence to the economy as a whole. With more rates moving towards that magic sub-4%, borrowers will not only benefit financially, but it will encourage the property market to grow and improve, giving everyone that important psychological lift. Sentiment in the mortgage and property market is everything.”

Dariusz Karpowicz, director at Albion Financial Advice: “Another positive news from major lenders with yet another series of rate decreases! The mood and feel of the mortgage market are improving every day. Will the Bank of England follow suit and decrease the base rate during the next vote? It is now looking very likely and much anticipated. Let’s hope these cuts continue to bring some much-needed relief to borrowers and keep the momentum going in the right direction.”

Ranald Mitchell, director at Charwin Mortgages: “The mortgage market is turning up the heat, and it’s fantastic news for everyone. With nearly daily price cuts, this trend is set to revive a market that has spent a few years in the cold. The once sluggish landscape is now full of potential and excitement. With prices dropping, homeownership and costs of funds are becoming more attainable. Whether you’re a first-time buyer or looking to upgrade, the current market conditions are ripe for picking. Don’t miss out – it’s time for action.”

The reasons behind the recent reductions have been looked at by Octane Capital, which analysed swap rates over 30 and 60-day periods to predict what could be in store for the market as we approach a possible base rate reduction from the Bank of England on August 1.
 
Mortgage market swap rates reflect the price lenders have to pay financial institutions when securing fixed rate funds, which they use to offset short-term risks associated with fixed rate mortgages.

They are generally based on government bonds – Gilts – which reflect what the market anticipates will happen to interest rates down the line.
 
In sum, the cost of swap rates filter through to mortgage rates, whether they rise or fall, and currently they’re falling.
 
With the UK economy finally showing signs of improvement and with inflation at its target rate of 2.0% it’s expected by some analysts that the base rate will drop from 5.25% to 5.0% on Thursday.

The mortgage sector is already responding in anticipation, with swap rates showing early signs of decline.
 
The analysis by Octane Capital shows that, over the past 30 days, swap rates have declined at an average daily rate of -0.22%. In contrast, the 30 days prior saw swap rates increase at an average daily rate of 0.06%.
 
The trend also holds true when analysed over a longer period of time. Over the last 60 days, swap rates have fallen by an average of -0.08% daily, compared to an average daily increase of 0.13% over the previous 60 days.

Octane chief executive Jonathan Samuels says: “There’s a high chance that we could see a cut to interest rates come August, a year on from them hitting their recent peak of 5.25%. We’re already seeing swap rates start to reduce in anticipation of a potential base rate cut and we expect this trend to continue as the next Bank of England decision approaches.
 
“This will be welcome news for mortgage holders who have seen the cost of their repayments climb considerably in recent times, and so too for prospective buyers who have had to reevaluate their position in the market due to increased borrowing costs.”