Mortgages could get even cheaper as a further cut in interest rates by the Bank of England (BoE) looks likely in a bid to protect the post-Brexit economy.
Economists predict that BoE is likely to announce a further cut to the base rate in November, bringing it down from 0.25% to just 0.1%.
Mortgage borrowing rates are currently at an all-time low with lenders across the board continuing to shave percentage points off their best deals in an effort to attract greater business from those buying or remortgage property, including buy-to-let landlords.
Santander, Virgin Money, Nationwide, NatWest, TSB are the latest in a flood of lenders to have slashed rates in recent days, but many experts are now suggesting that it is unlikely that mortgage rates will fall much further, as lenders look set to sustain existing rates, or possibly even increase pricing to boost profits.
In fact, initial fears that many mortgage lenders would not pass on last month’s interest rate cut by BoE have been realised, after it materialised this week that almost half of mortgage lenders failed to pass on the cut in base rate made in August. This is in spite of the fact that BoE’s governor Mark Carney has put pressure on lenders to pass on rate cuts.
Speaking before the BoE cut interest rates last month, David Whittaker, managing director of Mortgages for Business, anticipated that many mortgage providers would not pass on the interest rate in full to borrowers “in order to regain recent months’ lost margins”.
Now Samuel Tombs, chief UK economist at Pantheon Macroeconomics, reports that the anticipated reduction in the base rate in November has already been factored in to most mortgage lenders’ pricing.
“The rates that banks can borrow at in the wholesale market have been at record lows for a while now,” he said.
“Instead of seeing lenders cut rates, we are actually seeing them widen their spreads and I think it's likely we’ll see that process continue, meaning mortgage rates aren’t going to be materially different at the end of the year from now.”
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So what's the purpose of it all then? I'd like to think interest rate policy is part of some cunning plan and, one day, we'll all acknowledge how brilliant it was. But I kind of worry that there is no plan.
Mark - you're right about there being a "cunning plan" behind Mr Carney's apparent craziness ... it's clearly designed to further undermine what little confidence foreign investors currently feel in the UK economy - so that the "feared recession" will actually occur. His policy is one of destroying (certainly for many UK savers/pensioners) the hopes of Brexit, and trying to manipulate an environment where major economic destabilisation gives Parliament the excuse not to trigger Article 50. Even the 'leaked' suggestion of more interest rate reductions is part of the same nefarious strategy. If anything, the BoE should be putting interest rates up !!
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