Experts have predicted mortgage rate rises for years but they have stayed low – are things changing now?
At least 10 lenders have increased mortgage rates in the past week – including giants Nationwide and Halifax – as expectations grow of a rise in the leading Bank Rate set by the Bank of England.
The mortgage deals affected are ones where new borrowers sign up for “fixed rates” – where the interest rate they pay is locked for a set period, usually two or five years.
Rates have been at record lows for many months. Any clear indication that they are on the rise will prompt fresh calls for borrowers to take out an ultra-low rate while they can.
Nationwide, the largest building society, raised the rate on its cheapest two-year fixed deal from 1.19pc to 1.44pc. Industry insiders said that while the increases announced to date were small they could easily “snowball” as lenders adjusted their rates in line with rivals.
“Although it’s not yet a seismic shift, this kind of repricing can pick up speed,” they said.
“Borrowers that have so far failed to take advantage of the ultra-low fixed rates may want to consider if now is the time to act. The Bank Rate, set by the Bank of England, is the barometer against which most household savings and borrowing rates rise and fall.
It is now expected to post its first increase in more than a decade, come next month.
Fixed-rate mortgage are also more specifically dependent on the prevailing “swap rates”, which measure the cost at which one bank borrows from another. Swap rates for two and five-year loans have approximately doubled over the past 12 months, indicating that fixed mortgage rates will also move up.
In line with Nationwide’s increase, Halifax has increased selected fixed rates by 0.2pc. Three other lenders increased rates yesterday by between 0.1 and 0.25 percentage points: Monmouthshire Building Society, Newcastle Building Society and specialist lender Aldermore. Also making changes in the past week were Skipton, Leeds and Coventry Building Societies and Santander.
The only way from here is up. Excellent deals remain, but borrowers need to act fast.
Waiting and seeing whether the Bank of England raises interest rates may leave it too late to take advantage of the best deals, contact us today on 0800 567 7482 and let one of our friendly advisers discuss your options with you.