Two-year swap rates falling below 5 per cent is the “best news we have heard in months”, The Mortgage Expert's Darryl Dhoffer, has argued.
Dhoffer’s comments follow the revelation that two year swap rates fell to 4.998 per cent as of last week (September 22).
The swap rate drop follows the Bank of England’s announcement that it would not be raising interest rates from their current rate of 5.25 per cent.
Dhoffer added that it is now “surely a matter of days” before lenders react and launch more competitive 2 year-fixed rate deals.
He also expects that, within the coming weeks the big six lenders will come out with “2-year deals beginning with a 4”.
Shaw Financial Services owner and mortgage expert, Lewis Shaw, pointed out that the announcement represents the first time the two-year swap has been below 5 per cent “for months”.
Shaw added that, given that swap rates are one of the main tools for lenders pricing fixed-rate mortgages, it’s “nailed on” that 2-year fixed-rate mortgages will start to reduce over the next few weeks.
However he specified that this will only be the case if “the economic status quo is maintained”.
Hudson Rose managing director, Graham Taylor, stated: “Two-year swap rates falling below 5 per cent is undoubtedly a good sign and comes off the back of the better-than-expected inflation figures.
“With the market subdued, lenders are already starting to price quite aggressively, and we may start to see this competition increase as they are buoyed by the fall in their underlying cost of funding.”
Additionally, Moor Mortgages director, Peter Stamford stated: “It looks like the swap market is reacting to yesterday’s base rate decision.
“This is a really positive signal for homeowners, as it will allow banks to reduce rates and ease the pain of movers and remortgagers alike.”
Trinity Finance adviser, Amit Patel stated that the news indicates that “confidence is now back in the market.”
He added that it is “welcome news for borrowers who are due to come to the end of their fixed rates.”
However, Rose Capital Partners founder, Richard Campo, cautioned: “It’s great to see money markets falling, but the champagne may still need to stay on ice for a while yet.”
Campo explained that he expects a “slow reduction” of fixed rates as each lender “buys in” new funds at the new lower rate over the coming weeks.
He added that “this process could take weeks, or even months, to play out fully” as was therefore “still cautious” about recommending any fixed rate currently as it is likely to be undercut in the coming weeks.
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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