12 December 2016

Should you snap up a long-term fixed rate before they disappear?

After a long period of lenders continually reducing their fixed-rate mortgages, we are starting to see some of the longer-term fixes move the other way with several lenders raising their ten-year fixed rates in recent days. This reflects the movement in Swap rates, which ultimately underpin the pricing of these products and means lenders either face squeezed margins or increase their fixed rates in order to protect their profits.

‘Most borrowers don’t opt for ten-year fixes so it is the pricing of five-year fixed rates which is of more interest. Five-year Swap rates have risen by half a point from their previous low a couple of months ago and while mortgage rates haven’t moved that dramatically to reflect this yet it may be that lenders either hedged funds against a rise or still want to attract business so are prepared to reduce their margins. There are still five-year fixes pegged at less than 2 per cent but they are unlikely to go much lower for the majority of lenders unless we see Swaps start to fall again.

‘The big unknown is what will happen with interest rates as the market generally gets this wrong. All manner of external factors – Trump’s election, uncertainty in Europe – can have an impact. It is all about sentiment which is very hard to predict.’

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