As previously mentioned “swap rates” are the best indicator of typical fixed rates going forward. These are the average rate at which the wider financial services industry hedges against rate fluctuations.
When a lender wants to offer a fixed rate over 5 years they do so knowing that the actual cost to them might vary during that time. To minimise that risk and allow them to plan accordingly they buy “swaps” which another firm provides, which ensures that any drop in rates is insured against. As a result these swap providers are very focussed on where rates will go in the same way a home insurer is focussed on the risk of flooding or crime.
Read the full article but the takeaway from this is that the market thinks that rates have hit their lowest point.
