Mortgage rates ‘should drop within month’ after Bank votes for cut
Yesterday’s Bank of England interest rate cut is the first positive news for the local mortgage market in years, a local broker has said.
The rate dropped by a quarter of a percent yesterday – the first drop since the start of the pandemic in March 2020.
The drop, from 5.25% to 5%, could soon be reflected in mortgage and savings rates and was welcomed by local brokers and agents.
SPF Private Clients managing director Pierre Blampied said this was the first positive news the mortgage market had seen in some time.
‘Banks will look at how the yield curve reacts, which gives an indication of how investors and the markets feel,’ he said.
‘But you would expect fixed rates to be reduced within the month and we should see some better options in the mortgage market soon.’
However, he said he would still not recommend fixed rate mortgages.
‘Rates are now on a downward curve and people should still be looking at discounted tracker rates instead. I think this trend will continue and rates will fall further over this year and next.’
The base rate fell to an all-time low of 0.1% during the Covid crisis, only to start to rise again in late 2021 as inflation rose, reaching 5.25% in August last year, from which it remained unchanged until yesterday.
The Bank Of England’s rate-setting committee voted by a majority of five to four to reduce the rate, and Mr Blampied said he had expected the vote to be tight.
‘It looks like it came down to the chairman’s casting vote,’ he said.
‘Savers are going to be hit, but they have had a relatively good time of late. I don’t think a drop of a quarter of a percent will have major impact. I expect that drop to be reflected within saving rates within the month.’
Mr Blampied thought the move could stimulate activity in the Guernsey housing market.
The number of local market homes sold in the first quarter of this year was the lowest over a three-month period since records began in 1999.
‘It has been a buyers’ market recently,’ he said.
‘But even in the last couple of weeks the number of mortgage enquiries we have had has been going up in what is usually a quiet time of year.’
Stuart Leslie, director and head of residential sales at estate agents Savills, broadly agreed.
‘We are really looking forward to some stability,’ he said, ‘Any incremental reduction will hopefully see a return to a more normal market without the extremes of recent years.’
The Bank’s Monetary Policy Committee is next due to meet on Thursday 19 September, when a further drop in the base rate could take place.
