News
Letting agents demand mortgage lenders cut rates to help market
Friday 1st March 2024
Graham Norwood
The letting agents' trade body Propertymark has made the unexpected move of calling on banks to cut mortgage rates.
Rates are typically decided by market forces rather than lobbying, but Propertymark is calling on banks "to develop more affordable mortgage products to help ease borrowing costs and inspire consumer confidence."
It says inflation is now steadying and Bank of England base rate cuts are "close on the horizon" so it is critical of the many mortgage lenders who in recent days have increased rates for borrowers, in response to movement on the swap market.
A swap rate is a rate based on what the markets believe interest rates will do in the short term. If the rates rise, then mortgage lenders typically increase their rates in repose: if swap rates go down, mortgage rates typically fall as well.
Propertymark's call comes as speculation grows on the possibility of 99 per cent mortgages being announced at next week's Budget. These would just a one per cent deposit, with mortgage loans underwritten in some way by government to ease concerns from lenders.
Propertymark says that if the scheme is approved, it would "without doubt bring the prospect of home ownership more closely to many but may also have the potential to drive up demand and thus possibility contribute to artificially inflated prices in some cases."
Nathan Emerson, chief executive at Propertymark, comments: "Propertymark are keen to see first time buyers assisted with their property buying journey and lower rate mortgage products are always an encouraging first step to boost affordability for many.
"It's important any additional incentive schemes are well thought out and structured in a way that supports the wider housing market, there must be an understanding that rapidly increasing demand within one demographic may cause an unintended consequence for others. Ultimately with an ever-growing population greater emphasis needs placing on ensuring there is a considered range of new sustainable housing being built at a rate that keeps pace with demand."
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