Mpowered Mortgages hosted a special edition of its 'The Rate Stuff' podcast at this week's Financial Reporter Awards in Manchester, discussing a range of topics from inflation and Bank Rate to first-time buyer affordability and the benefits of five-year over two-year fixed rates.
Jack Izzard from Gallia Communications interview Peter Stimson, director of mortgages at MPowered, beginning the chat by discussing the future path of interest rates. Stimson correctly guessed that the Bank of England would hold interest rates this week, citing global uncertainty, falling unemployment numbers and weak GDP figures.
Discussing the future path of Bank Rate, Peter said: "August we're thinking now is probably a 50/50. We're thinking we'll get at least one bank base rate cut in 2025. The question is probably when it is. So if it's not August, September, if not September, probably November. That timeline is just getting pushed further and further back by inflation."
The conversation then turned to the interest rates available on two-year and five-year fixed rate products, which are now almost identical.
However, Peter cautioned brokers against recommending two-year fixes in the expectation that rates will be lower in two years' time.
He explained: "The only thing I would caution brokers, and indeed customers, is there's a lot of uncertainty out there.
"Do not expect rates to just continually to keep falling. It's not going to be this continual drop downwards. There is going to be a settling of rates potentially around somewhere around 3.75%, 3.50%. We've got stubborn inflation. We've got lots of issues in the global economy.
"I think with quite a lot of brokers there's this expectation or thought that rates are going to be lower in six months, 12 months, 24 months."
Jack and Peter then turned the discussion towards first-time buyers underestimating what their lending capability is, and why the role of brokers is vital.
Peter commented: "There's no getting away from it. It is very hard as a first-time buyer to get on the ladder. If you go back to 2000 I think the median income needed to buy a house was something like three times. It's now just over seven times. But having said all of that, the situation has actually improved in the last two or three years.
"Wages have gone up, house price inflation has stagnated. There's lots of different ways that brokers can assist first-time buyers and sort of explain to them different ways that they can get onto the housing ladder."
"A lot of the press coverage has been quite negative when actually the situation the last two and three years has actually got better for first-time buyers.
"Lenders have reduced their stress rate calculations which is meaning that, in the last year alone, the amount someone can borrow has gone up by about around about 20%. A lot of lenders will lend more particularly to first-time buyers. So if you're going to get a stretch above 4.5 times LTI, it's often favoured towards first-time buyers."
You can watch the full interview with Peter Stimson in the video at the top of this article.
