Swap rate fall offers ‘light on horizon’ for mortgage loans: Octane Capital

A recent fall in swap rates following the Bank of England’s 0.25% base rate cut to 4.5% offers hope for homebuyers and buy-to-let investors, according to Octane Capital. Five-year swap rates have declined, with some dipping below 4%, while mortgage rates are also easing.

Octane Capital’s CEO, Jonathan Samuels, notes that lender confidence is growing, with mortgage affordability expected to improve in the coming months. This positive trend suggests a more optimistic outlook for the property market in 2025 compared to last year.

Inflation jump to 3% jeopardises further base rate cuts

The UK’s inflation rate rose to 3.0% in January, its highest in 10 months, prompting concerns that the path to the Bank of England’s 2.0% target will be challenging. Mortgage experts warn that this unexpected increase could slow or even reverse recent fixed-rate mortgage cuts.

While some argue that inflationary pressures are due to temporary factors, others caution that high wage growth and global economic trends could sustain inflation, making imminent interest rate cuts unlikely. Despite market expectations for two rate cuts this year, analysts suggest the Bank may face difficulties justifying them if inflation remains stubbornly high.

NatWest cuts rates by as much as 46bps, TSB lowers resi rates by 0.30%

NatWest has reduced mortgage rates across various products by up to 46 basis points, with its buy-to-let range seeing the biggest cuts. Notable reductions include a two-year fixed remortgage at 75% LTV dropping from 4.46% to 4.00% and a five-year fixed purchase at 60% LTV falling to 4.26%. The lender has also cut rates on residential mortgages, including its Help to Buy range.

Meanwhile, TSB has made reductions of up to 0.30% across its residential offerings, including first-time buyer, home mover, and remortgage products. These changes reflect increasing lender confidence and improved mortgage affordability.

‘Static’ UK economy faces inflation pressures: BoE Bailey

The UK economy remains stagnant amid cost-of-living pressures, rising energy costs, and global trade uncertainties, according to Bank of England governor Andrew Bailey. Inflation is expected to rise to around 2.9% in January and peak at 3.7% later this year before easing.

Concerns also loom over potential US tariffs on VAT-charging countries, which could hit the UK economy by £24bn. Despite a slight 0.1% GDP growth last quarter, Bailey advocates a cautious approach to further rate cuts, balancing inflation risks and economic fragility. Markets anticipate two to three additional base rate cuts this year.

FTB homes facing stamp duty to quadruple in April: Skipton

The proportion of local areas in England where first-time buyers (FTBs) will face stamp duty is set to quadruple from 8.4% to 32% on 1 April, as the threshold falls from £425,000 to £300,000, adding £6,250 to purchases at the higher level, according to Skipton Group.

Further affordability challenges loom with Lifetime ISAs (LISA), as the £450,000 limit may soon be below the average FTB property price in many areas, restricting access to savings without penalties.

With nearly 90% of potential FTBs unable to buy locally, Skipton’s CEO, Stuart Haire, urges the government to maintain the current stamp duty threshold, raise the LISA limit, and reduce withdrawal penalties to better support aspiring homeowners.

Santander pulls 5-year sub-4% rate one week after launch

Santander is withdrawing its five-year fixed mortgage rate at 3.99% just a week after launch due to rising swap rates, with the change taking effect at 10pm on 21 February. While the two-year 3.99% fix remains, borrowers must act quickly to secure the five-year deal.

Market fluctuations have led to similar moves from other lenders, with Co-operative Bank temporarily pulling some fixed rates. However, Barclays, Nationwide, and Halifax are reducing rates, offering some relief. Despite volatility, experts expect the Bank of England’s base rate to trend downward over the year, though timing remains uncertain.

Wage rises ‘not as much as expected’: BoE Bailey

The Bank of England is taking a cautious approach to rate cuts as wage growth remains high, despite coming in slightly below expectations. Pay growth, at 5.9%, still exceeds inflation and the central bank’s target of sub-5% before cutting rates more aggressively.

With inflation expected to rise to 2.9% and economic fragility in play, economists suggest the next rate cut is likely in May rather than March. The City anticipates two more quarter-point cuts this year, bringing the base rate to 4% by year-end.

Lloyds Group profits slide but mortgage business robust

Lloyds Bank Group’s 2024 pre-tax profit fell 20% to £5.97bn, missing forecasts due to lower income, higher expenses, and a £1.2bn provision for motor finance compensation.

Despite this, loans rose £9.4bn to £459.1bn, led by £6.1bn in UK mortgage growth. CEO Charlie Nunn noted income gains in H2. Meanwhile, HSBC grew UK home loans by £3.7bn, raising its market share to 8.1%.

Mortgage lending growth to more than double this year: EY

UK mortgage lending is set to grow from 1.5% in 2024 to 3.1% in 2025, driven by falling interest rates and rising consumer confidence. While house prices and mortgage rates remain high, lending growth is expected to stabilize at 3.2% in 2026 and 3.6% in 2027.

UK bank lending is forecast to rise to 3.7% in 2025, with lower default rates expected. EY notes that while economic recovery strengthens confidence, risks such as geopolitical tensions and UK tax rises could impact future lending growth.

Tenants moving five times in five years due to landlord exits

Almost 19% of tenants have been forced to move five times in under five years due to landlords exiting the market, according to Cornerstone Tax. Many landlords are passing on high mortgage costs or leaving due to rising expenses. In addition, 17% of tenants have missed out on properties due to bidding wars.

Cornerstone’s David Hannah calls on the government to incentivize landlords, especially as demand continues to outpace supply. He criticizes recent housing reforms, like the abolition of Multiple Dwellings Relief, which have discouraged investment and reduced the housing stock. He urges the government to prioritize affordability and support for landlords to ease the housing crisis.