Swap rates react positively to rate decision: The prospect of ‘the first sub-4% 2-year fixed rate is more than just a pipe dream now’

Following the Base Rate cut on Thursday, swap rates have improved across the market. Both 2- and 5-year swap rates have dropped circa 9bps and are now around the 3.7% mark for the first time since January this year.

Newspage asked brokers whether this is likely to feed into fixed rate mortgage pricing in the days and weeks ahead. Their views are below.

Justin Moy, managing director at EHF Mortgages said, “The base rate and Swap rates are not directly linked, but the positive nature of today’s base rate cut has had an immediate impact on the money markets, with Swap rates now trading around the level last seen in January.

“The prospect of the first sub-4% 2-year fixed rate is more than just a pipe dream now. Cheaper borrowing will encourage more people to the market, and it may also encourage more to sell and that could have the opposite effect on property prices, as supply improves against demand.

“But with the mood lifted by the base rate cut, there will be quiet fist pumps from borrowers and a busy end to 2024 on the cards.”

Jack Tutton, director at SJ Mortgages, said, “The positive news just keeps on coming. The markets have reacted well to the Bank of England’s decision to cut the base rate by 0.25%.

“It was touch and go whether we would see a reduction today, but the markets clearly see this as a positive move by Threadneedle Street. Such a strong reaction will lead to lenders making widescale changes should this continue in the coming days.

“This is much needed for mortgage holders after what has been a very tough few years.”

Stephen Perkins, managing director at Yellow Brick Mortgages, said, “Whilst the base rate cut was mostly priced into the market, some were unsure it would come this month so we are seeing positive momentum on swap rates already.

“Let’s hope this continues to drive lender rate reductions so we can see more sub-4% rates and, ideally, at slightly higher LTVs.”

Ben Perks, managing director at Orchard Financial Advisers said, “It’s all coming together, finally. With brighter weather across the UK, the sun is also starting to shine on the property market.

“Let’s enjoy these positive trends and more buoyant times ahead. Borrowers and the property market will both benefit from today’s decision by the Bank of England to cut the base rate.”