Daily Express - are mortgage lenders jumping the gun?

ended 04. November 2021

A journalist at the Daily Express is looking for comments about how unfair it is that lenders are raising rates and pulling deals despite the base rate staying at a record low today. Essentially, homeowners and buyers shouldn't have to pay higher rates if Bank rate is staying the same. Quick reactions please - just 2-3 sentences will do.

7 responses from the Newspage community

Mortgage lenders are commercial businesses and it's up to them where they set their rates. As unpalatable as this may sound to consumers, they hold the purse strings and therefore you need to dance to their tune. There's already far too much snowflakery and whining; people need to get a grip and realsie banks are;t there to help you, they exist to make a profit and reward shareholders. There's plenty of options in the market so speak to a broker.
Homeowners may see little benefit from today's decision by the Bank of England to keep interest rates at 0.1%. Mortgage interest rates do not directly reflect the BoE base rate, but also take into account global factors, as well as the financial market's expectation of what is going to happen next. That expectation remains that BoE rates will increase in the near term, hence expect to see this reflected in increased mortgage costs. .
"It's wrong to suggest Banks know what the Bank of England was going to do. They like the vast majority of the Media & Mortgage Professionals got it wrong." "Mortgage Lenders estimated wrong and today they will reflect on their place in the market. The competition will again drive pricing until next quarter when we do this again."
Whilst it does seem unfair that the interest rates have risen when the base rate has remained the same, there is a counter argument that lenders are entitled to price their products how they like, without obligation from any changes made by the MPC. Not all lenders have increased their rates so consumers are free to apply to whichever lender has the best offering.
The Bank of England's base rate dropped to it's current 0.1% on the 19th March 2020. Yet it is only in the last few months that retail interest rates have been below 1%. It is competitive pressures between lenders that have driven rates down to these record low levels, nothing to do with the base rate. As these pressures have eased rates have returned towards where they were a few months ago, regardless of the Bank's decision to maintain their rate at 0.1% today.
It is a common myth that changes in the base rate are automatically passed on to fixed rate mortgage products that lenders offer. Mortgage interest rates are driven by a number of other complicated factors including competition in the market, swap rates, banks own lending targets and also their own service levels which need to be kept under control. These sub 1% deals we saw were only ever a short term treat as a small silver lining fallout from the pandemic, and these historically low interest rates are now on a trajectory to return to normal levels, albeit it still massively down on rates we saw offered in the early 2000s. Whilst we would all love to see mortgage interest rates remain at this levels, we must understand this was only ever a short term solution and we have already seen a shift up in what banks are willing to offer. If you are in a position to lock a new deal then you are not too late to jump on the back end of these historic products, although I would recommend you don't hesitate even another day!
Lenders were never going to keep rates sub 1% for long as it was all about risk management from them to get the best borrowers on their books the base rate does not have a direct influence mortgage rates.