Mortgage rates will fall again, but not any time soon

Today it was the turn of NatWest and Santander to join the queue of major lenders to tweak their mortgage rates — and not to the advantage of borrowers. 

Neither of the high street lending giants pushed through huge increases — mainly in the region of 20 basis points — but the direction of travel is clear and unhelpful.

It follows similar moves by Barclays, HSBC and the Co-op last week. The heady, and brief days of sub-4% money at the start of the year now seems a far distant memory. 

The lenders’ new pricing is only reflecting the harsh reality in the money markets. Hopes that the Bank of England will make their long awaited move on rates in June are steadily fading. The MPC hawks are hovering and scattering the increasingly nervous doves. It was only a month ago that Governor Andrew Bailey said rate cuts could come before inflation falls to its 2% target. 

But that does not seem to be the view of his chief economist Huw Pill who suggested the first move could still be some way off even after, as expected, inflation drops to 2% or below in the April figure — largely thanks to falling energy bills. 

If the markets are right, it will be August at best before the Bank finally acts, a full year after rates were given their last push up to the current level of 5.25%. 

Meanwhile every day thousands of homeowners are still dropping off mortgages taken out in the days of the record low cost of borrowing five and two years ago. Whereas a few months ago they might have hoped to lock in at close to 4% now they will be luck to access deals under 5%.

It is a disappointing outcome that will delay the return of the feelgood factor in the housing market, and to some degree the broader economy.

The era of sustained falling mortgage rates will arrive. But we are still a long distance from it yet.