Brokers are confident the mortgage rate war will continue past the general election despite warnings that uncertainty in the markets caused by a slump in oil prices.
Last week, commentators told Mortgage Strategy of their fears that collapsing oil prices could lead to an increase in swap rates and therefore fixed-rate mortgages.
The market expects base rate to rise in late 2015 or early 2016, thereby keeping a lid on swap rates, which reflect expectations of base rate and are key influencers of fixed-rate pricing.
Brokers believe this means borrowers can expect to see ultra-low mortgage rates beyond the general election in May.
Data from Moneyfacts.co.uk shows the prices of two- and five-year fixes have fallen by 40 and 45 basis points respectively to 3.27 per cent and 3.75 per cent respectively between July 2014 and 16 January.
Further, last week saw Santander and Skipton launch their lowest-ever two-year fixed rates, while Nationwide yesterday launched the market’s lowest-ever 10-year fixed rate at 2.84 per cent.
Your Mortgage Decisions director Dominik Lipnicki says: “The biggest point about the rate war is that the MMR ensured most lenders fell behind their lending targets and they had some catching-up to do to hit year-end lending targets.
“Dropping rates is the quickest way to compensate for that slump and, while the year-end may have come and gone, lenders will still be anxious about low activity levels in the run-up to the election.
“The market seems to be holding its breath and waiting to see what happens in the vote, so lenders are clearly trying to tempt borrowers with these incredibly low rates.
“I would imagine this rate war will continue at least until after the election, if not for a time thereafter.”
Trinity Financial product and communications manager Aaron Strutt says: “In 2015 we have the biggest threat to activity, which is of course the election.
“We’ve seen clients holding off until after the election and I imagine that’s the case for a lot of brokers.
“Clearly the best way for lenders to tempt them back into action is by cutting product rates.”