HSBC is the latest major high street lender to cut rates across its residential and buy-to-let mortgage range, following Santander yesterday, but brokers have warned events in the Middle East could see any cuts reversed quickly amid current volatility.
The new rates will be made public when they go live tomorrow, but brokers urged borrowers to not get carried away and start popping the champagne corks.
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said: “It’s hard to get overly excited about rate cuts given the current volatility in the market as today’s drops may well be tomorrow’s rises if events in the Middle East deteriorate and they are quickly pulled again.
“What’s needed more than the short-term relief of sporadic rate reductions is some stability and sustained rate reductions that stay around long enough to help borrowers.
“Earlier this week, it was revealed that the average shelf-life of a mortgage is just eight days at present and that’s a real problem.”
Geopolitical wobble
Louis Mason, Communications Director at London-based Oportfolio Mortgages, also welcomed the news but said things can change quickly, while also warning people against waiting for lower rates.
He said: “If this isn’t a positive signal, then I don’t know what is. The market clearly wants to believe we’re past the peak. But let’s not get carried away. Mortgage rates are still at the mercy of global drama. One geopolitical wobble or surprise inflation print and lenders will reprice faster than you can refresh your browser.
“As for buyers holding out for cheaper deals, which may happen, that rarely ends well. The irony is the moment rates dip, confidence returns, competition heats up and suddenly you’re saving 0.2% on your mortgage but paying 5% more for the property.”
It’s a view shared by Gaurav Shukla, CEO at Marlow-based Home Me Mortgages: “Cuts from HSBC, Santander and TSB are encouraging but markets can change quickly and we are still at the mercy of external shocks. Buyers have been cautious after recent increases, but cuts like this could start to bring them back.
“If rates ease further, demand will return quickly. However, waiting for the perfect rate often costs more than acting at the right time.”
Champagne corks
David Stirling, Independent Financial Adviser at Belfast-based Mint Wealth, said it’s too early for borrowers to celebrate: “HSBC piling in behind Santander and TSB is good news, but don’t pop the champagne corks quite yet.
“Swap rates have eased and lenders are feeling brave enough to reprice, but one bad headline out of Tehran could unwind all of it before the week is out. If you’re sat on your hands waiting for rates to bottom out, don’t.”
Harry Goodliffe, Director at HTG Mortgages, is also worried that these cuts, though welcome, could easily be reversed: “HSBC joining the rate-cutting trend adds weight to the idea that we may be past the peak, but it’s far from a done deal.
“Lenders are reacting to improving swap rates and competition as much as any clear shift in the wider outlook, and that can turn quickly if global events scare markets again.
“So yes, the direction of travel looks better, but this still feels fragile. Rates may be easing, but it wouldn’t take much to reverse this mood.”
Fingers burnt
Elliott Culley, Director at Hayling Island-based Switch Mortgage Finance, said lenders will remain cautious, even if they do start cutting rates: “Mortgage lenders are starting to reduce their interest rates as there are some tentative signs that we may be over the peak.
“However, these reductions in rates are only going to be small as lenders will not want to get their fingers burnt in the current volatile market and have to backtrack on these reductions.”
Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, arrived at a similar verdict: “HSBC following Santander and TSB with rate cuts does add to the feeling that we are at or very close to the peak, but I do not think the market is fully settled yet. Lenders are still moving cautiously.
“It would not take much, whether that is inflation data or something happening globally, for rates to move back up again.
“What we really need now is some consistency. It is a positive step, but it still feels like we are in a transition rather than a fully settled downward trend.”
