Last note argued that a lender holding fortnight-old pricing against a funding cost that had risen underneath it was carrying a margin it did not intend to carry, and that the correction had only one plausible sign. That is what happened. The five-year limited-company range we follow most closely was withdrawn in its entirety and replaced roughly ten to thirteen basis points higher, with the no-fee end taking the largest single step. It is a clean, whole-range move rather than a trimming at the edges, which is what a lender does when it has decided its funding assumption is stale rather than when it is nudging a single product.
The underlying move continues. GBP SONIA swaps are up again — a third consecutive fortnight of increases, roughly seven to ten basis points across the curve — and the five-year is now around 4.45%, which puts it at, and arguably fractionally through, the peak it set in late July. The two-year is a shade over 4.25%. There is no longer a July spike with a retracement inside it; there is simply a rising curve that paused for two weeks in early August. Recasting it that way makes the last three notes read more coherently than they did at the time.
One oddity is worth recording rather than smoothing over. While the lender side moved up, the broker-panel lists we sample moved down: the bulk of the five-year listings at the middle loan-to-value band repriced lower over the same period, some of them by more than ten basis points, alongside a batch of new listings at the higher-fee end. That is the opposite direction to both the swap curve and the direct lender move, and we do not have a confident explanation for it. The candid answer is that panel lists aggregate a lot of lenders on their own repricing cycles, and a page refreshed at the start of September may be catching up on decisions taken in the middle of August, before the latest leg of the swap move. We would not read it as evidence the market is softening. If the next sample still shows panel pricing falling into a rising curve, that becomes interesting; one reading of it is more likely a lag artefact than a signal.
A methodological note, since it affects how much weight the above deserves. Of the two swap sources we cross-check, one has not refreshed its data in over a fortnight, so this reading rests on a single current source rather than the usual two in agreement. The direction is consistent with the lender behaviour we can observe independently, which is some corroboration, but it is weaker evidence than we normally require and the number should be treated as approximate.
The practical reading is the one we have been giving since late July, now with the supporting event behind it rather than in front of it. Pricing secured before the summer move continues to look better than anything currently on the shelf, and the gap has widened rather than narrowed this fortnight. The case for disturbing arrangements already in place has correspondingly weakened again. What we said a fortnight ago about the switching case being a wasting asset has simply resolved: it wasted.
And the arithmetic point survives another turn of the cycle, as it always does. A low headline rate carrying a percentage-based arrangement fee still tends to lose to a slightly higher rate with no fee once the fee is financed and carried across the fix. The cheapest-looking product in this month’s replacement range is a case in point: the lowest rate on offer is attached to a percentage fee substantial enough to leave it costing more over five years than the no-fee option sitting above it. This is the most reliably recurring observation in these notes, and it is worth doing the sum every time rather than trusting the ordering on a rate table.