TAG Mortgages

Its been an interesting August in the mortgage market .

Fixed and variable rates have dropped in the residential markets ( rates from c3.7%) and held steady in commercial funding, even with the many pressures currently being faced. 

The drop in residential rates in August is due to lenders being behind target YTD and reducing rates to maintain market share creating a “mini rate war” . The underlying economics and swap rates (the costs of funding to lenders) continues to rise, which in a normal market would push up the cost of borrowing. 

Unfortunately UK PLC is not doing too well ,inflation continues to rise and currently stands at 3.8%, unemployment is at a 4yr high and rising, and the cost of UK debt servicing increases weekly putting further pressure on Government coffers. There are many concerns about the “black hole”, the governments attempts to address it and reducing market confidences. Without going too deeply into underlying trends / issues we expect bank base rate to reduce again in December 25 or January 26. This will benefit those on variable rates but is unlikely to affect fixed rates.   

I believe residential rates will largely remain unchanged for the rest of the year but will rise at the beginning of 2026 ( new annual targets for lenders come in and the rate war will end ). Pressures are especially evident on fixed rates which are largely dictated by swaps. 

Commercial rates are holding steady and most increases in Swap rates have been built into pricing models. There is however exposure to market sentiment, and we may see fixed rate money rises on further negative data . 

As always thanks for your continued support , don’t hesitate to contact us should you have any questions. info@tagcommunity.co.uk