In 2016 we were lucky enough to witness the lowest mortgage rates we have ever seen. Will this trend continue in 2017 or will prices start to rise? Erin Gallacher, consultant mortgage broker offers her opinion.
When it came to residential mortgage rates, 2016 did not disappoint. Not only did Bank Rate drop for the first time in seven years to an all-time low of 0.25%, but lenders were also offering the lowest rates we have ever seen with some falling below 1.0%.
What can we expect from 2017?
Let’s start with Bank Rate. It is widely predicted that inflation will rise in 2017, which some speculate will pressurise the Bank of England into increasing Bank Rate sooner rather than later. However, with so much uncertainty clouding 2017, particularly as Brexit negotiations commence, Bank Rate could do just about anything. I think, as do many market commentators, that Bank Rate will remain low for the next 12 months at least. I find it extremely unlikely that it will reduce any further. That isn’t to say this isn’t a possibility – Japan’s base rate is currently - 0.1%!
Now onto pricing of mortgage rate products. Bank Rate doesn’t necessarily have an effect on the rates lenders offer, although lenders are generally expected to pass on Bank Rate reductions to borrowers.
In December 2016 the Bank of England reported the first increase in two year fixed rate pricing since April 2016 occurred in November rising from an average of 1.75% from 1.74%. Of course this is still a remarkably low average, although I do tend to think rates will slowly creep up as SWAP rates continue to increase.
What should you be doing now?
This very much comes down to how risk adverse you are and what your disposable income looks like.
Here at Mortgages for Business we are keen promoters of long term fixed rates because of the length of protection they provide – a low risk strategy. Five year fixed rates are very low at the moment but will increase if SWAP rates continue to rise. So if you are dawdling on a lender’s Standard Variable Rate, whilst you may be paying next to nothing, do consider remortgaging before five year fixes creep back up.
That isn’t to say that fixed rates are for everyone. I myself have chosen to take out a Bank Rate tracker. Why? I live in the North of England with a fairly small mortgage. If rates rise, then yes it will cost me more, but it’s a gamble I’m willing to take and more importantly one I can afford – a higher risk strategy.
If there is anything you can take away from this, hopefully it is to question yourself and look at the rate you are paying at present. If you are in doubt about your next steps I strongly suggest you speak with a mortgage broker who can make the appropriate recommendation for your scenario.
For those of you in the north of the country you can call me directly on 01625 416392 and for those of you in the South you can call our main line on 0345 345 6788.