Mortgage Interest Rates Finally Go Below 4% This Year?
Summary
TLDRJames 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
🏦 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.
📉 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.
Mindmap
Keywords
💡Interest Rates
💡Mortgage Rate
💡Bank of England
💡Federal Reserve
💡Inflation
💡Property Market
💡Sonia Swap Rate
💡Marketing Strategy
💡Fees
💡Remortgage
💡YouTube Algorithm
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
subscribe to the channel and hit that
Bell notification check out all the
other content on my channel including
this video right here
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