Post Election: Which direction are mortgage rates heading?

In this article, we look at the immediate effects of the Labour Party's election victory on money markets, focusing on inflation rates, lender confidence, and the potential for mortgage rate changes.

Following the recent election and a Labour triumph, we have been monitoring the reaction from money markets and how a new government will impact the short term. While the government's plans for housing, property finance, and tax are not finalised, markets have initially bounced due to increased confidence from perceived political stability.

The next key milestone to influence this was the July inflation rates announced 17/07. Inflation held at 2%, and yet while this is the Bank of England’s (BoE) target, the result surprised many who had expected a slight drop. Due to the percentage being impacted by stubborn service inflation, initially, this saw markets react negatively, with wide reports that it was less likely for the BoE to drop the base rate in August, which in turn could see a reverse in lender confidence and slowdown in the recent mortgage rate drops. However, in the last 24 hours further analysis of the reports showed that wage inflation did in fact drop to 5.7% from 5.9%, seen as a positive factor within the overall result thus curtailing some of the pessimism and again given increased confidence for an August base rate drop.?

In anticipation of the inflation figures and as a direct result following, lenders have already been pricing in small rate drops in recent weeks. Nearly every major lender has reduced rates so far in July, with some doing so on multiple occasions. Whist we are not there yet, in the mainstream residential lending space, rates are creeping ever closer to the 4% mark which will provide welcome relief to people looking to take mortgages by helping with affordability and relieving some financial pressure.

With lenders frequently reducing rates, anyone looking to make an offer on a new property or refinance their existing property should seek up-to-date advice, as it could save them thousands in interest. Capital Private Finance’s expert brokers are available to provide tailored advice.

Capital Private Finances expert brokers are on hand to provide tailored advice. Contact us today to discuss your mortgage options and make the most informed decision for your future.

Author:

Amit Gupta Regional Financial Services Manager, Capital Private Finance