It is of course to be warmly welcomed that the cost of borrowing for a five-year fixed rate mortgage has dropped below 6% once again.
But why has it taken so long? And why is it still so high? Five-year fixes were at 4.75% on the day of Kwasi Kwarteng’s ill-fated mini Budget, some 120 basis points below where they are today.
Yet gilt yields have fallen back rapidly to levels last seen well before 23 September when the former chancellor lit the fuse that almost exploded the Government bond markets. Thanks to Rishi Sunak and the new Chancellor Jeremy Hunt a blanket of calm has been thrown over the sterling bond markets.
But mortgage holders reaching the end of their fix deals — at a rate of roughly 6,000 a day — are still having to refinance at borrowing costs twice or even three times what they locked in at before.
So what is going on? One theory is that lenders took on substantial amounts of debt when gilt rates were peaking and are therefore being forced to lend it out to homeowners at elevated — but profitable — prices.
Another is that there is a level of permanent or semi-permanent scarring in the mortgage market that has opened up a wider gap between gilt rates and market mortgage rates.
It is not yet clear — but one thing is for sure. Millions will continue to pay a heavy price for the disastrous Trussonomics experiment for years to come.
