SWAP Rates rise slightly in uncertain markets 19.01.2009

Author: David Whittaker Posted on: 19 January 2009

In uncertain trading at the end of last week SWAP rates actually rose by between 7 and 10 bps reversing the consistent downward trend of the last several months - in fact on most pricings since 22 September !!! This has cooled the enthusiasm for lenders to keep on pricing all mortgage products downwards until the extraordinary events of the last two working days are behind us.

In uncertain trading at the end of last week SWAP rates actually rose by between 7 and 10 bps reversing the consistent downward trend of the last several months - in fact on most pricings since 22 September !!! This has cooled the enthusiasm for lenders to keep on pricing all mortgage products downwards until the extraordinary events of the last two working days are behind us.

In uncertain trading at the end of last week SWAP rates actually rose by between 7 and 10 bps reversing the consistent downward trend of the last several months - in fact on most pricings since 22 September !!! This has cooled the enthusiasm for lenders to keep on pricing all mortgage products downwards until the extraordinary events of the last two working days are behind us.

The re-current problem in the market is liquidity. Mid to late January is normally a time when institutions, who held onto funds over the turn of the year, release them into the market and differentials between LIBOR rate and Bank of England Base Rate (BBR) recede and SWAP rates look forward into a calendar year that matches the SWAP periods.

But these days nothing is normal and the very real spectre that nationalisation may be forced on two or more of our major banks seems very real ane very imminent. So do you lend money to another bank today if you don't need to? Not until there is some daylight on whether yet another round of bail-outs will keep those institutions afloat. Not really helped by RBS' new CEO, Stephen Hester "fessing up" - his words not mine - to an almighty £8Bn loss of which £2.5Bn is to a Russian Oligarch - enough said !!

So what to do ???? If cashflow is what matters in these uncertain times then look at fixed rate buy to let mortgages - preferably 3 or 5 years - 2 years may be cheap but do you want to be falling back onto LIBOR or BBR just at the moment inflationary pressures come to bear on the economy?? There is even one school of thought that expounds the notion that rates may have to go up NOW just to prevent a run on sterling - normally a sensible reaction to that scenario but a real "vote killer" just as job losses mount and bonuses and overtime are words that many of us won't be hearing for a long, long time !!

Despite all the bad news, the UK banks and building societies are continuing to lend but without external wholesale money supply it seems to many that  the lack of credit is their fault - not true - they are talking to us every day and deals are being financed - albeit on tougher terms than eighteen months ago. But who wants to go back to 2007 levels of lending - just stupid politicians ever eager for a soundbite !!

Check out our fixed rate buy to let mortgages now - or talk to us about tracking LIBOR rate or BBR - there are plenty of solutions out there !!