Recent data from the purchasing managers' index gave a “dire” outlook for the economy, but could “spell good news” for mortgage holders, Shaw Financial Services founder, Lewis Shaw, has claimed.
Shaw's comments follow PMI data released on Wednesday morning in which the composite PMI dropped to 47.9, its lowest level in over two and a half years.
At the same time, both the two-year and five-year Swap rates were found to have dropped, falling from 5.668 per cent and 5.017 per cent on Tuesday to 5.449 per cent and 4.778 per cent on Thursday morning respectively.
Shaw explained this may be positive news for mortgage holders, saying that the Swap rate reductions “could translate into further mortgage rate reductions in the coming weeks”.
Shaw was not alone in this assessment as SelfEmployedMortgageHub.com founder, Graham Cox, added: “Perversely, bad economic news is good news for mortgage rates at present.”
Cox added that, as a result, it is now “less likely” the Bank of England base rate will rise as much as people had previously thought.
“I suspect we don’t need any further base rate rises and we’ll now see inflation and the economy rapidly decline,” he explained.
However, EHF Mortgages founder, Justin Moy, said the Swap rate reduction is “unlikely to prevent another base increase, as inflation still needs to be tackled.”
The Mortgage Expert founder, Darryl Dhoffer, added that a further rate rise of 0.25 percentage points in September “still looks likely”.
However, Dhoffer added that further rises “look harder to justify” due to the “sheer number of headwinds now facing the economy”.
He added: “This could be the turning point we have all been hoping for in terms of mortgage rate, with further reductions possible in the days and weeks ahead.”
Additionally, R3 Mortgages director, Riz Malik, stated: “The question is whether these rate reductions will come quickly enough to rescue the disastrous year for the UK’s property market.
”Its fate could have been sealed by then.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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