Jeni Browne explains why she thinks fixed rate mortgages are more likely to rise than fall in the coming months despite the cut in Bank Rate.
In August the Bank of England’s base rate was reduced to 0.25%, so naturally the expectation is that fixed rate mortgage product pricing will follow suit, right?
Wellllllll actually, not so! 10 year gilt yields have increased from a low of 0.527% in August to 0.98% at the end of last week. This follows Theresa May’s comments where she suggested that the Bank of England should rein in quantitative easing. Furthermore, SWAP rates have been edging up recently.
These points, combined with the fact that lenders have already factored in the base rate reduction, mean that there is every chance that fixed pricing is going to increase.
The very good news is that right now, fixed mortgage rates are very low and so this would be a very good time for people to review their mortgage arrangements and lock into the fixed rates that are available now before they increase.
Obviously, if you are already on a fixed rate – it will not rise because the rate is fixed for a certain period of time! If however, you are now on the lender’s reversionary rate, it should be time for you to review your options. You could save on your monthly mortgage payments and/or raise capital.
As ever, to talk through what this means for you, do get in touch.
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11th October 2016