Global Events Could Spark Cut in UK Mortgage Rates

The UK mortgage market may be influenced by global events rather than domestic monetary policy. According to Sebastian Murphy, group director at JLM Mortgage Network, a resolution to the conflict between Iran and other nations could lead to lower oil prices and swap rates, giving the Bank of England room to cut interest rates.

Murphy points out that the prolonged conflict in the Strait of Hormuz has been driving up oil prices and swap rates. He believes that any deal reached will rapidly push oil prices lower and drag wholesale funding costs down with them.

The base rate is currently at 3.75%, but fixed mortgage rates have risen to around 4.7% due to rising swap rates, not a move in the base rate. Murphy suggests that clients are better off taking out tracker mortgages, which are currently half a percentage point cheaper and carry no early repayment charge.

The lender environment is also a factor, with major lenders unlikely to close out the year with completions running below target. However, self-funded institutions have more flexibility to cut independently, while warehouse-funded lenders are more exposed to swap rate movements.