Inflation Falls in November To 3.9% and We See the First Lender Release Sub 4% - Five Year Fixed Rate

In a positive turn of events, inflation has sharply dropped to 3.9%, reaching its lowest point since September 2021, down from October's 4.6%, according to data from the Office of National Statistics.

There are several factors influencing the inflation fall, with price increases slowing in sectors such as transport, recreation, culture and food. Though the most significant impact comes from a reduction in fuel prices.

Though we are not yet at the Bank’s target of 2%, inflation is lower than the government’s year end target of 5.3% and a Reuters poll of economists had projected a figure of 4.4%. This trend suggests a favourable outlook for 2024 as the country approaches 2%.

The markets are predicting that there will be a reduction in the Bank of England Base Rate in spring, which has been shown in the fall in swap rates over the last few days. However, Andrew Bailey from the Bank of England urged caution, stating that “there is still a long way to go” in tackling inflation any expectations of a spring rate drop might be premature.

The markets predictions find support in the recent drop in SONIA swap rates which indicate financial market projections, this will only put more pressure on the Bank of England to reduce rates going forward.

SONIA swap rates are used by lenders to price their fixed rate products. The recent reductions in the last few days show the likelihood of the two, three and five year fixed rates will follow suit as illustrated in the table below.

_{Source: Chatham Financial - 21 Dec 2023 | 13:00 GMT}

Lender Launch of Sub 4% - Five Year Fixed

Gen H are the first lender to release a sub 4% five fixed rate mortgage this year ahead of the pack setting a welcome precedent for all borrowers. With this barrier broken, anticipation builds for other major lenders to follow suit, possibly releasing sub-4% mortgages before the year concludes and into 2024.

Gen H are offering a sub 3.95% for remortgages and sub 4% for new purchases provided you have a deposit for 40%. Even with smaller deposit of 20% rates offered are sub 5%  

Predictions for 2024

Following a sluggish year in the housing market, these recent developments are being embraced with enthusiasm across the board. General consensus is  borrowers and lenders are gearing up for a potential resurgence in January.  Anticipating swift reactions from lenders, who are likely to promptly reduce prices to attract more business and meet targets that may have fallen short in the past 12 months.

Simultaneously, it is anticipated borrowers will be seizing the opportunity to secure new properties or mortgages at more manageable rates compared to the peaks seen in the summer.

As usual we are expecting a large influx of new properties on the market starting from Boxing Day and through January, in what some are calling a “January Sale.” The collective optimism from both borrowers and lenders hint at a promising and dynamic start to the upcoming year.

With the market changing daily it is important to receive advice on securing the best mortgage for you. Contact us or call 01628 564631 for a consultation with one of our team members.

The information contained within was correct at the time of publication but is subject to change.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage.