Mortgage rates dropping in 2023!

Tom Andrews, Director of Salcey Mortgages explains how mortgage rates are calculated and what is influencing the mortgage market at the moment “SONIA (Sterling Overnight Index Average) is more often used to work out what interest rate lenders charge for Fixed Rate lending. SONIA is based on actual transactions and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions and other institutional investors.

A lot of people assume the Bank of England Base rate is the main driver behind pricing (and this is the case with Tracker rate mortgages and to a certain extent Fixed Rates) however SONIA is what lenders look at in considerable depth. As you will see Jan 2022, rates were very low. This peaked shortly after the 'mini budget disaster' last year. You will see a steady decline in rates since. This is why Fixed Rates have been falling for new business. By keeping a close eye on this, we can almost predict the moves lenders are going to make! For the eagle eyed, you will see 5-year money is cheaper than 2-year money. We understand this is because of more uncertainty over the next 2 years compared to the next 5 years.”

With regards to specific rates we have seen in 2023 so far, earlier in the month we had TSB Bank reducing rates by up to 1.3% and Nationwide Building Society reducing by up to 0.6%.

Leeds building society have confirmed they will give slightly cheaper rates to people buying NEW BUILD as well as higher borrowing capacity. This is because they recognise energy bills will be cheaper on a new build resulting in more disposable income for a buyer each month. NEW BUILD properties tend to be very energy efficient therefore costing less to run. Leeds has since reduced their rates by a whopping 0.85% which certainly looks impressive, but worth remembering that their rates weren’t the most competitive to start with.

One of the bigger players in the mortgage market – NatWest, have reduced by up to 0.72%!  In comparison to some of the other lenders their rates were already pretty good so this is great news.

The UK’s biggest lender – HSBC has announced that it has dropped rates across the board as well as reducing their loan to value threshold. This means that buyers shouldn’t need as much deposit in order to borrow on their new home.

Other lenders across the board are also advertising reduced rates. Skipton, Accord and Bank of Ireland have all reduced. Great new for first time buyers as Accord have reduced by up to 0.36% on their NEW BUILD product range. Virgin have reduced rates by 0.4% and ATOM bank have reduced rates by 0.2%. All of which can only be positive for those of you out there looking to borrow money in order to buy a home.

More and more lenders will also now accept a builder gifted deposit when someone applies for a mortgage on NEW BUILD products. This should never be more than 5% of the purchase price though as this is the cap all lenders adhere to. Additionally, the client will get a better rate and improved borrowing capacity as they are putting down a bigger deposit using funds of their own and a builder gifted deposit.

As we can see; overall things still are not as good as they were 12 months ago, but compared to 3 months ago in the wake of the government’s disastrous ‘mini budget’, things are definitely on the up and will hopefully continue for the months to come.

Please note: Loveitts Estate Agents are not financial advisors and so this article is not in any way purporting to give financial advice. The details here are facts and figures supplied to Loveitts by regulated financial advisors and are for information purposes only. Information corrects as of time of publication.