Last week we wrote that the range of plausible outcomes had widened at both ends. Eight days later, it has narrowed again, towards the upper end.
The fall in swaps we recorded last week did not last. The five-year is now around 4.8%, roughly twelve basis points higher than a week ago and slightly above the early-September peak. That makes it the highest reading we have recorded. The rest of the curve moved with it: the two-year is around 4.6%, the three-year about fifteen basis points higher at a shade under 4.8%, and the ten-year a little above 4.9%. One detail stands out. The three-year and five-year points are now almost identical, so the market is putting close to the same price on money fixed for three years as for five. The mild retracement that looked possible a week ago has not happened.
Product pricing kept rising. The broker-panel lists refreshed again this week and moved up almost across the board, by roughly ten to twenty basis points on the five-year seventy-five per cent products. Fee-free five-year pricing at that loan-to-value is now around twenty basis points dearer than a week ago. The one change we most wanted to see is that the large-percentage-fee product, which had held its rate through two previous reprices, moved this time as well. We suggested that big-fee products were where lenders were choosing to hold a headline rate. That held for a month, and now it has stopped holding. One mid-fee option at the cheaper end also dropped off the list, which leaves fewer ways to trade a fee for a lower rate. The direct lender we follow most closely has not issued a new guide since last week’s reprice.
Last week, pricing and swaps moved in opposite directions, and we explained that as lenders pricing against a curve that had since moved. This week there is nothing to explain. Swaps and pricing both went up, and the lag we have spent two months describing now points the same way as the market. The broker-panel refresh looks mostly like a response to last week’s swap level. It does not yet reflect this week’s move, and the curve is higher again. If lenders keep repricing on the pattern we have seen all month, another round is more likely than a pause. Anyone hoping that some of last week’s increases would quietly reverse should not expect it.
The Budget at the end of October remains the obvious catalyst, about five weeks away. On the evidence of the last three weeks, lenders are not waiting for it.
On sources: our primary swap source now shows the two-year point for a second consecutive reading, so for the first time in over a month we can report a two-year direction as well as a level. It is up. The secondary source still has not refreshed since mid-August, and we are not treating it as live.
The practical reading has hardened again. Pricing secured before the summer looks better than anything available today, and the gap widened this week. For a short fix maturing in the next year or so, we would now budget on the assumption that it rolls onto something materially higher than it pays today. Waiting for improvement looks like a weaker plan than it did a week ago.