“Swap rates depend on rate expectations, so they’re likely to fall as expectations drop, and fixed rate mortgages may get cheaper,” Coles explained.
“Fixed rate mortgages have already come down slightly from the peak, with the average two-year fixed rate at 6.74 per cent and the average five-year rate at 6.22 per cent, according to Moneyfacts.
“They’re still eye-watering rates, but have backed off from August 2, when the average two-year rate was 6.85 per cent and the average over five years 6.37 per cent.
“Unfortunately, we can’t expect seismic moves in the immediate future. For that we’ll have to wait until the market expects the Bank of England to be cutting rates – which isn’t on the cards for quite some time.”
Meanwhile for savings rates, expectations of future rate rises have tempered somewhat since the PMI data release.
Hargreaves Lansdown said it was pricing in a base rate of 6 per cent by December 2023 before the release but expectations of the base rate reaching that have come off quite substantially.
Mark Hicks, head of active savings at the firm, said the market is still pricing in at least two more rate rises by the end of the year.
“Whilst this is unlikely to affect savings rates at the front end of the curve in easy access, which tend to move more in line with base rate, this will add further pressure to banks reducing pricing in one-year fixed term deposits, a trend we have seen occurring over the past few weeks,” he said.
“Fixed term saving rates tend to move more in line with swap rates, which take into account future expectations of rate rises. If we continue to see future expectations of interest rate rises decrease this could well be the last chance for clients to fix their savings rates at this elevated level of 6 per cent.”
sonia.rach@ft.com
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