Some brokers reckon rates could come down across the board as soon as next month.
Justin Moy, founder at Chelmsford-based EHF Mortgages, said pricing a mortgage below 4 per cent will be “a sweet spot” for the entire mortgage market – borrowers, brokers and lenders alike.
“There is a lot to be said about the psychology of pricing, and we are getting closer to that mark,” Moy explained.
“We should get there due to lender appetite, and the need to stimulate market activity. Lenders will offer the lowest rate to the lowest-risk business, typically the lower loan-to-value borrowers.
“We may need to wait until February, but anyone who is looking for a new deal just needs to speak to their mortgage broker and stay in touch.”
Many brokers across the UK are currently recommending tracker rates due to the fact fixed rates are still falling, so as to avoid clients locking into rates which could soon disappear.
“Currently, we are seeing tracker rates as low as 3.74 per cent,” said Elliot Cotterell, director of Bristol-based Windsor Hill Mortgages
“I see a lot of possible benefits for clients having flexibility over the next five to six months.
“We'll see further competition between lenders over the coming months and although another slight rise in the base rate is on the cards, we will likely see further reductions in fixed rates and I think these may drop below 4 per cent by March, if not sooner.”
Base rate will put off sub-4% rates
Founder of Teesside-based mortgage broker, Riverside Mortgages, Lewis Shaw has said it's doubtful fixed-rate mortgages will dip below 4 per cent in the next six months simply because the base rate hasn't yet stopped increasing.
“Even though fixed rate mortgages aren't priced directly from the base rate, any increase affects both gilts and, by extension, swap rates, often used as a reference rate for fixed rate debt,” Shaw explained.
“As the saying goes, a rising tide raises all boats. If the Bank of England monetary policy committee agrees on February 2 to a tenth base rate increase in a row, it'll mean that what we call the 'risk-free rate' will be higher and will push up swaps and, by extension, halt the downward direction we've seen over the past few weeks for fixed rates.”
ruby.hinchliffe@ft.com
