23 April 2018

Cheap mortgage deals may disappear as lenders anticipate rate rise

Speculation is raging as to whether there will be in an interest rate rise next month, with Swap rates factoring in a potential rise. Several mortgage lenders – including Sainsbury’s, Tesco Bank, Barclays, NatWest, Halifax, Lloyds Bank and Santander – have recently raised mortgage rates on the back of higher funding costs.

Research from Moneyfacts.co.uk reveals that the average two-year fixed-rate is now 2.5 per cent, the highest level since July 2016. However, it is worth noting that this is an ‘average’, so there are cheaper deals available.

In November, the Bank of England raised interest rates for the first time in a decade. There are fears that there will be another rate rise in May, followed by more later this year. However, nothing is absolutely certain. Bank of England governor Mark Carney said last week that a May rate rise is not a foregone conclusion and that Brexit talks could delay any action. Inflation has also fallen to a one-year low of 2.5 per cent, reducing pressure to raise Bank Rate.

So what should borrowers do? The key is to review the mortgage rates available so you don’t miss out on the cheapest deals. If you are on your lender’s standard variable rate, you are probably paying more than you need to – speak to an independent mortgage broker, such as SPF Private Clients, to see whether you can access a cheaper deal.

If you are coming to the end of a fixed or discounted-rate in the next few months it may not be too early to speak to a broker. You can always reserve a rate ready for when you need to remortgage and at that time, if rates are lower, you can choose another deal. But with interest rates seemingly on an upwards trajectory, it is highly unlikely that mortgages will get much cheaper in coming months.

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