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Monetary policy, not fiscal policy is the biggest driver of mortgage rates

BOE
  • Bailey asked if APF sales are causing mortgage rates to go higher says that the overall market impact is rather small. And that the BOE staff estimate that long-term yields are up to 10-15bp higher.
  • Ramsden says mortgages are priced off 2y or 5y terms (which aren't up 10-15bp) and in that time Bank Rate has been up 100s of basis points.
  • Asked if mortgage rate increases are now all down to monetary policy or if there is still a fiscal premium in there. Ramsden says by far the majority in the whole yield curve the driver is monpol. However in MPR the Bank noted at the long-end of the gilt curve (10+ years) there is some impact from UST issuance and there may have also been increased uncertainty - increasing a risk premium. A year ago fiscal policy was very unstable - and that was having an impact. It's hard to discern an uncertainty premium for that now - but markets do like stability and certainty in policymaking and there has been a lot more of that over the past year.
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