Autumnโs Base Rate cut fired the starting gun for many would-be homebuyers who had been holding out for cheaper mortgages, and the surge in new mortgage approvals seen in September is the result of accelerating demand from borrowers and intense competition between lenders.
One month on and the market still hasnโt hit full speed, and it even risks cramping up as rising swap rates force many lenders to nudge interest rates back up.
Swaps – which are essentially the wholesale cost of money for lenders – have been edging up in advance of tomorrowโs Budget, making it steadily harder for lenders to offer the interest rates seen in August and September.
Even with the Bank of England widely expected to trim its Base Rate again next week, the swaps problem is of increasing concern. So much so that the Budget might trump the Bank in terms of where next for mortgage rates – especially for five-year and 10-year fixed rate loans.
Itโs great to see new mortgage approvals return almost to their pre-Truss levels in this September data, but no-one should assume that cheaper mortgages and more lending will immediately follow a Base Rate cut next week.
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