New Optimism for a New Year


Economists join growing chorus of cautious hope for the months ahead

The beginning of a brand-new year has seen lots of optimism bubbling away for the prospect of brighter times ahead on the interest rate front. Economists from Goldman Sachs are firmly on the side of hopefulness, recently setting out their prediction that the Bank of England will cut interest rates faster than previously expected, softening the impact on households of higher mortgage rates by billions in the process.

Their prediction came as new figures showed mortgage approvals jumped to a five-month high of more than 50,000 in November – the highest number since June 2023 – signalling that confidence to buy is returning to the market.

After the larger-than-expected drop in the inflation figures for November, we saw a slight increase in December which caused both the foreign exchange markets and the stock market to react. However, there has not as yet been any negative reaction in terms of mortgage rates and we do appear to be entering a period of more stability.

What does this mean for mortgages?

A new year also means new targets for lenders and renewed competition to attract buyers. We expect rates to continue to drop this year and we have already seen substantial falls. We are beginning the year in a place where some rates start with a 3, and we are confident we will see more of those on offer as Q1 unfolds.

In terms of how best to navigate this market, we are advising clients to lock in a rate now, which can be kept under review throughout the application process. Tracker mortgages are another good option, as they can be switched to a fixed rate later in the year. For those already on a tracker, it is worth reviewing to see if there is scope to improve upon the current terms.

Tracking trends

We are seeing the margins between two-year and five-year fixed rates narrowing more than they were in Q3 and Q4 of last year, with some fixed rates now coming in below 4%. As a result, we are seeing an increase in clients wishing to fix as rates appear more favourable.

In the commercial market, the prevalent trend remains clients purchasing buy-to-let properties via limited company structures as opposed to owning them in a personal capacity. We have also seen a spike in enquiries for businesses looking to purchase premises instead of renting with the aim of increasing their asset bases.

As always, the Henry Dannell team is here to provide expert advice and guidance which will enable you to make informed decisions. Get in touch with us to find out more about our offering and how we can help you achieve your mortgage goals.

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Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.