Are we finally reaching the light at the end of the tunnel?
Brokers have discussed the possibility of a rate tussle
NatWest has reduced its fixed rates by up to 0.65% on both two- and five-year products, as of August 11.
This followed the likes of other major lenders, such as Halifax and Nationwide which made rate reductions, proceeding the Bank of England’s latest base rate rise.
Brokers have shared their views as to whether the mortgage market could finally be reaching the light at the end of the tunnel, as well as if a rate war can be expected. Read on to find out what they said.
Lewis Shaw, owner and mortgage expert at Shaw Financial Services, said after months of rate hikes, this was the light at the end of the tunnel we had all been waiting for.
While Shaw said the mortgage and property market were not out of the woods, he added that at least the direction of travel was now on the right course.
“With the rate cuts by Nationwide, HSBC, TSB and Halifax, it was already hotting up for a rate war; now that NatWest has thrown its hat in the ring, other lenders will soon follow,” he said.
Shaw believed the mortgage market should anticipate some fixed-rate ‘fisty-cuffs’ as mortgage lenders battled it out for market share.
“If we see positive inflation data on August 16, expect more of this; I would not be surprised if interest rates drop below 5% by the end of the year,” Shaw added.
Rhys Schofield, brand director at Peak Mortgages and Protection, said with a ‘crash of thunder and a flash of light, some rubbish interest rates flew out of sight.’
Schofield added that granted the flurry of hefty rate reductions in mortgage brokers’ inboxes still equated to higher rates than consumers were used to, but he believed it was still great news for hard-pressed borrowers.
“There certainly seems to be a full-blown rate war brewing, with lenders once again competing for business in what feels like a much calmer and more settled market,” he added.
Craig Fish (pictured left), director at Lodestone Mortgages & Protection, said big lenders were now finally reducing prices following what he considerd to be an overzealous reaction to the Bank of England's decisions in recent times.
“I firmly believe that most lenders are overpriced, merely to control workloads, while they adopt a wait and see what our competitors do attitude,” he said.
Fish added that this had had a negative effect and resulted in greatly reduced mortgage transactions, while lenders still had lending targets to achieve.
With lenders beginning to cut rates, Fish said this was a step in the right direction, back towards where he believed rates should have been kept in the first place.
“However, I think the real rate war will commence when we see the inflation data that will be released on August 16, provided it continues to move in the right direction; lenders may then be able to get their targets back on track,” he added.
Gary Boakes (pictured right), director at Verve Financial, agreed with Fish that lenders were aware there was currently less business, and were looking to make moves to pick up what they could for the rest of the year.
“I also suspect the cuts are due to lenders’ initial panic after the 0.5% base rate rise in June, and that they are now realising there was no need to increase rates as high and quick as they did,” he added.
Rob Gill, managing director at Altura Mortgage Finance, said NatWest were the fifth major lender in August to announce significant rate cuts, coming off the back of last month's lower than expected inflation figure, and the Bank of England reacting with a relatively modest hike of 0.25%.
“These could be the opening salvos in a full-on 'back to school' rate war next month, as lenders seek to recover from a quiet July and August,” he added.
Are you expecting to see lenders battle it out in a rate war? Let us know in the comment section below.Light at the end of the tunnelRate war restarting