Mortgage Interest Rates Finally Go Below 4% This Year?

Summary

James Nson's YouTube video discusses the potential for mortgage rates to drop below 4%, a more significant concern for consumers than the Bank of England's rate. He outlines the current property mortgage price war, the banks' strategy to stimulate the market by cutting rates despite high inflation, and the positive signs from inflation data. Nson also highlights the banks' tactics for free advertising by offering sub-4% rates and advises viewers to watch out for increased fees alongside lower rates.

Takeaways

• 📉 Mortgage rates are expected to drop below 4%, which is significant for consumers looking to reduce their mortgage payments.
• 🏦 The decrease in mortgage rates is not directly tied to the Bank of England's base rate, but rather is influenced by market competition and bank strategies.
• 📈 There is currently a 'property mortgage price war' among banks, which is beneficial for consumers as it drives rates down.
• 📊 The Bank of England and the Federal Reserve have signaled potential rate cuts, which positively impacts the mortgage market.
• 📉 Mortgage rates began to drop in January 2024, despite high inflation and without a base rate cut from the Bank of England, to stimulate the market.
• 📈 The market became busier around March 2024, indicating that rate cuts can take a few months to influence market activity.
• 🏠 Many potential homebuyers are waiting for rates to drop further before committing to a mortgage, creating a current demand for lower rates.
• 📊 Inflation data has improved, hitting the 2% target for two consecutive months, which may influence the Bank of England's stance on interest rates.
• 📉 The downturn in China and decrease in oil prices may alleviate inflation pressure, contributing to a potential rate cut.
• 📉 Transactions are currently 25% down compared to 2019, indicating a significant slowdown in the market that banks aim to reinvigorate.
• 💰 Banks are borrowing at lower Sonia swap rates, which is one of the reasons why mortgage rates are decreasing.
• 📰 Banks may cut rates below 4% to gain free advertising through media coverage, a strategic move to attract customers.
• 💡 Consumers should be aware that while rates may be lowered, banks could potentially increase fees, so it's important to consider the overall cost.

Q & A

What is the main topic of James Nson's YouTube video?

The main topic of the video is the potential decrease in mortgage rates, which are likely to go below 4%, and the factors contributing to this change.

Why is the decrease in mortgage rates more interesting than the Bank of England's interest rate?

The decrease in mortgage rates is more interesting because it directly affects consumers' monthly payments, making it a more immediate financial concern for those with mortgages or looking to get one.

What does James refer to as a 'property mortgage price war'?

The 'property mortgage price war' refers to a competitive market scenario where banks are cutting mortgage rates to attract more customers, which is beneficial for consumers.

How many consecutive times did the Bank of England rate increase before it was held steady?

The Bank of England rate increased 14 consecutive times before it was held steady for around four or five times.

What signals are the Bank of England and the Federal Reserve giving regarding interest rates?

Both the Bank of England and the Federal Reserve are signaling that they are likely to cut interest rates soon, which is a positive sign for consumers.

Why did banks cut rates in January despite high inflation and the Bank of England not dropping their base rate?

Banks cut rates in January to stimulate the market, which had become quiet, and to be more competitive, even though inflation was still high and the Bank of England had not yet lowered their base rate.

What impact did the rate cuts in January have on the market by March?

The rate cuts in January led to an increase in inquiries and business by March, indicating that it took a few months for the market to respond positively to the rate cuts.

Why are many potential homebuyers waiting to secure a mortgage?

Many potential homebuyers are waiting to secure a mortgage because they want to ensure they are not getting the highest possible interest rate and are anticipating further rate drops.

What is the current state of inflation and how does it affect the banks' decision to cut rates?

Inflation has hit the 2% target for two consecutive months, and with positive signs such as a downturn in oil prices, banks are gaining confidence to cut rates despite the Bank of England's caution about potential inflation risks.

How has the market slowed down and what is its impact on banks?

The market has slowed down with transactions being 25% down compared to 2019, which is a significant downturn. This affects banks as they make money from lending, and a slow market reduces their lending opportunities.

What is the Sonia swap rate and how does it influence mortgage rates?

The Sonia swap rate is the rate at which larger banks borrow from institutions like JP Morgan. When this rate is cut, it contributes to a decrease in mortgage rates offered by these banks to consumers.

Why might banks cut rates below 4% as a marketing strategy?

Banks might cut rates below 4% to gain significant free advertising through media coverage. This strategy can attract more customers and potentially offset the cost of the rate cut.

What should consumers watch out for when banks offer lower rates?

Consumers should watch out for potential increases in fees associated with lower rates. It's important to consider both the rate and any associated fees to determine the best mortgage deal.

Outlines

00:00

🏦 Anticipated Mortgage Rate Decline Explained

James Nson introduces his YouTube channel and discusses the potential for mortgage rates to drop below 4%, a more significant concern for consumers than the Bank of England's base rate. He outlines the current property mortgage price war and encourages viewers to subscribe and engage with the content. James then explains the recent stability in the Bank of England's rate and signals from the Federal Reserve that suggest an imminent rate cut. He attributes the current drop in mortgage rates to banks' efforts to stimulate a quiet market in December 2023, despite high inflation at the time. He also notes that banks are preemptively dropping rates in hopes of attracting consumers who are waiting for a more favorable rate before buying or remortgaging their homes.

05:00

📉 Market Slowdown and Banks' Response to Stimulate Demand

The second paragraph delves into the reasons behind banks' proactive rate reductions. James points out that positive inflation data, with two consecutive months hitting the 2% target, and a potential decrease in energy costs due to a downturn in China, are contributing factors. He also discusses the service sector's impact on inflation, which is beyond individual control, and suggests that banks are gaining confidence from the Bank of England's softening stance. The paragraph highlights the significant downturn in market transactions, which is a major concern for banks. To reinvigorate the market, banks are borrowing at lower rates, such as the Sonia swap rate, and subsequently reducing mortgage rates to attract business. James predicts that banks will use the strategy of sub-4% rates for marketing purposes, gaining free advertising through media coverage. He advises viewers to watch out for potential fee increases that may accompany lower rates and to consider both rates and fees when making financial decisions.

Keywords

💡Interest Rates

Interest rates are the percentage at which banks charge for borrowing money or pay for deposits. In the context of the video, interest rates are crucial as they directly affect the cost of mortgages. The script discusses how mortgage rates are likely to fall below 4%, which is significant for consumers looking to reduce their mortgage payments. The video mentions the Bank of England's interest rate and how it influences mortgage rates, with the script indicating a potential decrease in these rates as a positive development for borrowers.

💡Mortgage Rate

A mortgage rate is the interest rate that borrowers pay on their home loans. The video emphasizes that mortgage rates are more relevant to consumers than the Bank of England's base rate because they impact the cost of housing. The script suggests that mortgage rates are currently in a state of flux, with a 'property mortgage price war' indicating a competitive market that could lead to lower rates for consumers.

💡Bank of England

The Bank of England is the central bank for the United Kingdom, responsible for setting the base interest rate, which influences other interest rates in the economy. The video script notes that the Bank of England's rate has been held steady after 14 consecutive increases, signaling a potential upcoming cut, which would typically lead to a decrease in mortgage rates.

💡Federal Reserve

The Federal Reserve is the central banking system of the United States, similar to the role of the Bank of England in the UK. The script mentions that the Federal Reserve is signaling a rate cut, which is relevant to global financial markets and could influence the direction of mortgage rates in the UK.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The video discusses how inflation data has been positive, with two months of hitting the 2% target, which could influence the Bank of England's decisions on interest rates. Lower inflation can lead to lower interest rates as there is less pressure to raise rates to combat rising prices.

💡Property Market

The property market refers to the economic sector involving the buying and selling of property, including land and buildings. The script describes a slowdown in the property market, with transactions down 25% compared to 2019, indicating a significant downturn. This market condition could be a factor in banks' decisions to lower mortgage rates to stimulate activity.

💡Sonia Swap Rate

The Sonia (Sterling Overnight Index Average) swap rate is a financial instrument used by banks to borrow money, which is tied to the interest rates they offer on mortgages. The script mentions that larger banks have cut the Sonia swap rate, contributing to the decrease in mortgage rates as it becomes cheaper for them to lend.

💡Marketing Strategy

A marketing strategy is a plan for reaching a specific marketing-related goal in a focused and achievable way. The video suggests that banks may cut their mortgage rates below 4% as a marketing strategy to gain free advertising through media coverage. This is an example of how financial institutions can use rate adjustments to attract attention and potentially more customers.

💡Fees

Fees in the context of the video refer to additional costs associated with obtaining a mortgage, aside from the interest rate. The script warns viewers to watch out for potential increases in fees even as interest rates decrease, as banks may offset the lower rates with higher fees to maintain profitability.

💡Remortgage

Remortgaging is the process of paying off an existing mortgage and replacing it with a new mortgage, often with more favorable terms. The video suggests that the potential decrease in mortgage rates could be an opportunity for homeowners to remortgage and secure a lower interest rate.

💡YouTube Algorithm

The YouTube algorithm is the process by which YouTube's search and recommendation systems select and order videos to display to users. The script mentions the importance of likes and subscriptions for helping the video's visibility on the platform, indicating that viewer engagement can influence how often the video is recommended to other users.

Highlights

James Nson predicts mortgage rates are likely to drop below 4%, which is more relevant to consumers than the Bank of England's base rate.

A property mortgage price war is currently ongoing, which benefits consumers.

The Bank of England and Federal Reserve have signaled potential rate cuts, which is positive for mortgage rates.

Mortgage rates have already started to decrease in recent weeks, despite high inflation and no change in the base rate.

Banks cut rates in January 2023 to stimulate a quiet market, which led to increased market activity by March.

Many potential homebuyers are waiting for rates to drop further before purchasing.

Banks are offering lower rates to attract customers and stimulate the slowing market.

Inflation data has improved, hitting the 2% target for two consecutive months, which may influence the Bank of England's stance.

A downturn in China and reduced oil prices could alleviate inflation pressure by the end of 2024.

Service side inflation is less controllable and may affect the Bank of England's decisions on rates.

The market has slowed down significantly, with transactions 25% down compared to 2019.

Banks are concerned about the slow market and are looking to reinvigorate it through rate cuts.

Banks borrow at the Sonia swap rate, which has been cut, contributing to lower mortgage rates.

Different banks are competing to offer the lowest rates to attract customers and media attention.

Banks may use sub-4% rates as a marketing strategy to gain free advertising through media coverage.

Consumers should be aware of potential increased fees alongside lower rates.

James anticipates the emergence of sub-4% mortgage deals in the coming days.

Transcripts

hey my name is James nson and welcome to

my YouTube channel interest rates are

likely to start going below 4% now I

don't mean the bank of England interest

rate I mean the mortgage rate you pay

and that's way more interesting than

what the bank of England do because at

the end of the day you want to pay less

on your mortgage now in this video I'm

going to tell you when this might happen

why this might happen and what likely is

contributing to rates coming down at the

moment we're see seeing a property

mortgage price War at the moment and

that is what we want as consumers now

before we jump into this as always if

you haven't done already do subscribe to

the channel over there and hit that Bell

notification we're on the way to 26,000

subscribers I appreciate everyone that

takes a moment to do that and while here

smash like tickle like do something do

the like button that really helps me

with the YouTube algorithm it means

you're just a great person if you do it

so go and smash that button over there

so what's going on well interest rates

the bank of England rate went up 14

consecutive times it's now been held for

around four or five times and you're

seeing the bank of England is signaling

they're going to cut rate soon the

Federal Reserve are also signal

signaling they're going to cut rate soon

which is really positive stuff and

that's what we need to happen so that's

the base rate and what we want though is

the mortgage rates to drop and they have

been over the last few weeks now this

happened back in December as well so

last year December

2023 the market went really quiet that's

not great for banks they make money in

lending money that's what they want to

keep doing right so they need to

stimulate the market and so what they

did in January was cut rates lots of the

banks did this and so mortgage rates in

January started to go down inflation was

still high the bank of England wasn't

dropping their base rate or interest

rate at all but the banks did this to

just get more competitive and stimulate

the market which it did the market got

busier around March which shows that it

takes a few months in order for things

to start happening so in March more

inquiries came in more business came in

and the banks were busy again right but

that was short lived and so now they've

got a problem where there's lots of

people that want to buy a house that can

afford to buy a house but they just want

to make sure that they're not getting

the rate at the highest possible

interest rate so there's tons of people

now that are just waiting for interest

rates to drop and so what the bank are

doing is they're giving you that drop

even before the bank of England has done

that so let's look at some of the

reasons why they're doing that well

first is inflation data is pretty good

now so we've had two months now where we

have hit the 2% Target now the bank of

England say in their meetings there is a

risk of inflation coming back at the end

of this year due to energy costs however

if you look at the price of oil there's

a downturn in China at the moment and so

oil costs have actually gone down so

that might eliminate some of that

inflation pressure coming back at the

end of 2024 so that's positive news now

a lot of the inflation that potentially

could come back is not down to me or you

it's down to service service side

inflation so you can't control the price

of oil you're still going to heat your

house you're still going to turn the

lights on in your business uh and it's

just something that's out of your

control and so because of that Banks

kind of understand that hopefully the

bank of England is softening their

stance on this now uh and inflation

isn't beaten but it is definitely in a

stronger position so that is giving

Banks more confident the biggest problem

that they've got at the moment is the

market has slowed down again like it did

in December right transactions are

25% down compared to 2019

25% that that is a huge downturn a huge

downturn in transactions now it hasn't

hit prices too much yet because what

we're seeing is there are equal number

of buyers and equal number of sellers in

the Market at the moment so they're kind

of matching up quite nicely and we

haven't had lots of desperate sellers in

the market because we did have um the

mortgage scheme that the the Tories had

that meant that you could go on interest

only the banks were kind of told don't

repossess properties uh and so they kind

of held back on that and so there isn't

loads of distressed sellers at the in

the Market at the moment but that could

change right and so if that changes

prices will start to drop but the banks

their biggest concern is it is a slow

slow slow Market 25% down on 2019 as I

said 2019 was the last year that things

were really normal wasn't it and so they

want to reinvigorate the market again

and so the banks they borrow from bigger

Banks so HSBC Barkley Etc might borrow

from someone like JP Morgan who you may

have heard of and they borrow on a rate

called the Sonia swap

rate Sonia oh swap rate now those bigger

banks have cut that Sonia swap rate over

the last few weeks as well so that's

another reason why rates are coming down

at a faster Pace at the moment the

mortgage rate that you get is coming

down and so one is they want to

stimulate that market again like they

artificially stimulated it in December

they're doing the same again they're

battling so nearly every day I'm getting

different stories from HSBC from Barkley

from Nationwide nearly every single

lender the big traditional banks have

cut rates some of them have cut rates

free times in the last two weeks and

that's all to get the headlines and to

get that business from you guys and

maybe just convince you it's now time to

go and buy that house that you need or

to remortgage with that bank that's what

they're trying to do at the moment and

here's the bigger play

here is I feel rates will hit under 4%

so sub 4% rate due to

marketing marketing so look if you're a

bank and you cut your rate below

4% every single newspaper is going to

write a story on that and so by doing

that you're going to get so much free

advertising it's crazy and this is a

really smart advertising strategy we've

got banks at the moment that are at

4.1% drop it below 4% and suddenly

you're going to be in the financial

times the sun The Daily Mail the ey

newspaper everywhere is going to feature

you and that is something that would

cost millions of millions of pounds in

advertising but you get it for nothing

just by cutting that rate and that's

what you're going to start seeing people

do now here's what you need to also keep

an eye on because they might cut their

rate but what they might do is increase

their fees so what you might start

seeing is someone that says hey I've got

a deal it's 3.9% % but I want a 3% or a

4% fee in order to give you that rate so

you got to keep an eye on that stuff

because it's really important that you

look at not just the rate but the fees

as well and just see which rate works

best for you but I know in the next few

days you're going to start seeing some

sub 4% deals let me know in the comments

what you think do smash like do

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