For fixed-rate mortgages, which are more popular when the cost of borrowing is about to rise, the key rate to determine what banks pay for their funds is called the “swap” rate. Swap rates react to expectations of future interest rates and inflation. The other major factor is competition and lenders have been competing fiercely to attract customers and meet their lending targets and this has helped to keep mortgage rates at record lows. It’s slightly different for tracker mortgages, which are less popular at the moment where the wholesale rate is “Libor”, currently it is a little above Bank Rate.
Economists have been broadly expecting that the Bank Rate will initially rise from 0.5pc to 0.75pc, and further increases will be slow and gradual. So far, the swap rates that drive the cost of fixed-rate mortgages have not reacted to expectations of a rise in Bank Rate at the end of the year. This suggests that markets are relaxed about a Bank Rate rise and had already factored it in to the cost of borrowing. As a result, mortgage rates are unlikely to jump.
One thing is fairly certain; however record low rates that have been on offer for most of this year are unlikely to fall any further so if you want to lock in a fixed-rate deal you should maybe consider mortgaging sooner rather than later.
Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE
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