It is a just a case of “when”
Almost everyone has been enjoying low-cost home finance in recent years, with mortgages at rock-bottom. However, economic wheels that are now in motion, will highly likely see finance rates increase come the new year. Many lenders are already increasing their rates – here is why.
This article does not constitute advice.
Professional advice should be taken prior to acting on any part of it.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
The end of the era of super low mortgages
Banks, building societies and other lenders are slowly starting to increase the rates on their mortgage, as we see what is likely to be the end of rock-bottom interest rates.
Mortgage rates have produced for several records in 2016. Some deals, like that offered by HSBC, saw rates of less than 1 percent.
Some 10-year fixed rate mortgages have cost less than 3 percent.
The lowest rate ever recorded was 0.98 percent by Yorkshire Building Society.
Experts in the market now report that it is just a matter of time for further rate rises though.
Lenders such as building society, Skipton has been one of the forerunners, increasing their mortgage by up to 0.37 percentage points. West Bromwich’s 10-year fixed-rate deal, charging just 2.59 percent, has recently been “retired” as a product.
Virgin Money have also scrapped several of their leading products for first-time buyers, as the entire market take a new look on lending.
The driving force behind rates rising
Markets expect high inflation in the US following the appointment of the new president.
Subsequently, the cost of borrowing in the US has already increased and economists predict that this will, very soon, have a knock-on effect on borrowing in the UK also.
The 10-year rate of borrowing in the US is the most important metric to track, as it directly affects the cost of borrowing in the wholesale market.
The swap rate is the “wholesale” rate which banks and financial institutions use when lending to each other.
Any changes to the swap rate affects the price of mortgages, particularly fixed-rate mortgages.
Following Brexit, swap rates plummeted, which means homeowners could enjoy even lower fixed-rate mortgages.
Since August 2016 though, swap rates have been rising, which means that the wheels are already turning for consumer rates to also rise.
Take action soon to maximise savings
It is likely that long-term fixed rate mortgages will be the first product to see signifiant increases, as they are the most affected by an increase in swap rates.
So, if you are looking to lock-in a cheap rate for a long-term, say 5 or 10 years, then now is the time to take action.
It is likely that lenders will retain the lower rates on their 2-year fixed-rate products for now, to maximise transactions before the year closes. However, rises are likely to follow soon in the new year.
Speak to Chris about your mortgage
If you would like us to undertake a review of your current mortgage deal or you are thinking of purchasing in the near future and require funding, please contact Chris for a free, no obligation appraisal.
Tel: 01403 780 770