First Quarterly Review of 2023

Whilst reviewing the 1st quarter of 2023, it got me thinking about the last 6 months, as at last interest rates seem to be stabilising. The rollercoaster period of Liz Truss still leaves scars, as rates today are around 4% to 4.5% for a 5 year fixed and higher for 2-3 year fixed. Some commentators feel rates may fall slightly over the next 2 years, however the majority of my reading suggests rates won’t fall too far, as the days of 2% fixed rates appear to be over.

Lenders work via ‘swap rates’ as they buy money, then lend it at a slightly higher rate, so make a profit margin. Lenders profits have jumped markedly since last October as they have increased rates and widened their profit margins.  Good news for the lenders but not for us as borrowers. Whilst the bank base rate has increased to 4.0%, (from 0.1% in March 2020) so we have seen consistent rises over the last 2 years. Though the rate was 17% in 1979! So 4% maybe isn’t too bad.

Lenders are strict on their underwriting, especially for single applicants earning under £25,000 with a loan or PCP. As the economy has slowed due to inflation at over 13% (many say higher on food), lenders have to be seen to be lending prudently and not overstretching clients borrowing multiples.

Regrettably the lenders haven’t been so enthusiastic with their investment rates. The large banks/building societies are still offering awful rates for your money. Just this week the industry suggested fixed rate bonds may have peaked, where the top rates for a 1 year fixed rate bond is 4.1%. Higher rates can be achieved in monthly saving style accounts, however this is not on lump sum funds.

The FTSE has enjoyed a healthy quarter as it has rebounded and sat at 7947 recently with many feeling it would exceed 8000 soon.

Some short term hints to consider:

  • Whilst people have reigned in their spending, this doesn’t appear to be the case with holidays. Information from the banks illustrates spending on holiday bookings is well up on recent years. But using your card abroad or an ATM abroad is expensive. Starling Bank are cleaning up as they offer fee free spending abroad, worthwhile considering a second bank account with them if you are spending a few weeks overseas this summer.
  • Check your credit file : or are useful places to review your score, voters roll status and what ‘big brother’ has on file, as for any form of credit the lenders checks your background, so it is useful to know where you stand before applying
  • Savers have 4 months extra to boost their state pension. You can invest to ensure you qualify for the full state pension. It was due to close but has been extended.

It looks like being a tricky year with costs on the rise.
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Craig Scott
Mortgage Director