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Mortgage Wars

Capital Fortune predict a lender rate war over the forthcoming months and indicate that mortgage interest rates may be set to be the lowest for a lifetime. We have seen a number of regional lenders enter similar spaces to each other, entering more specialist lending over the last couple of years in order to increase volumes and margin. The competition in previous niches is now significant and the increased volumes now only seem sustainable by a focus on lower interest rates, slashing margins.

As they realise business can no longer be obtained by offering similar criteria to their peers they have no other options than to reduce rates and those lenders not offering retention to existing borrowers, see an exodus and customer movement at the end of each incentive deal.

For some lenders, margins are protected, where they have a high standard variable rate. This is the rate borrowers ultimately go on to at the end of their initial incentive deal.

Borrowers need to be far more vigilant and fully consider the final variable rate they will revert to once any new customer deal ends. Some products have variable rates as low as 1.64% (Godiva) whilst other lenders have products as high as 14.5% (Together).

In talking to lending partners, despite lending being at record levels, many providers are struggling for business and have already commenced the process of lowering fixed rates, despite indications from the Chancellor that Bank of England rates are set to rise.

This is an interesting development and we wait with a raised eyebrow, to see how far to the bottom, many lenders are willing to push rates down. The major beneficiary for this phenomenon are mortgage borrowers, but many savers, may soon start looking elsewhere for proper, higher rates of return.

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