More interest rate rises than expected
The Governor of the Bank of England expects interest rates to rise more quickly than he previously anticipated. Jeni Browne looks at the potential impact on borrowers and suggests what they can do to protect themselves.
Mark Carney spoke at the Treasury Select Committee on Wednesday. He talked about interest rates and what he felt the future held, and said that to keep inflation at bay, interest rates may have to rise more quickly than originally expected.
Two rate increases in 2018 is what was originally expected. This means that the Governor is now warning of three or more increases this year. If you ever needed an incentive to lock into a fixed rate, this really should be it.
If this isn’t enough, let’s look at the money markets. On 2nd January 2018, 5-year SWAPs were at 1.060%. On 21st February, they were at 1.364% - an increase of 0.304% points.
Assuming this had a direct impact on the rate at which banks were offering finance, this would mean an additional 1.52% in interest over a 5-year deal. Our average buy to let loan size sits at £230k, so this would mean an additional £3,496 in interest to someone borrowing this amount.
Obviously, the same rationale can be applied to home-owner and commercial mortgages.
The run in on SWAPs affecting consumer lending rates does tend to have a slight lag, but we have seen Fleet Mortgage increase its 5-year fixed rate buy to let mortgages by 0.2% points this week and we expect other mortgage lenders to let lenders will be following suit shortly.
So, this really does feel like the last chance to get a really good, solid fixed rate before the pricing goes up.
Buy to let mortgage rates
Looking at our buy to let mortgage finder, the lowest 5-year fixed rate buy to let mortgages start at:
For personal borrowers: 1.99%* (3.9% APR) 5-year fixed rate to 50% LTV with a lender arrangement fee of £1,995
For Ltd company borrowers: 3.29%** (4.8% APR) 5-year fixed rate to 65% LTV with a lender arrangement fee of 2% of the loan amount.
If you go onto our website you can see all of our buy to let rates in real time.
Home-owner mortgage rates
Five-year residential mortgage rates are currently starting from 1.74% (3.05% APRC).
Commercial mortgage rates
Commercial mortgages are more bespoke in nature. The lowest deal we’ve achieved for a customer recently was a variable rate at 2.75%. If you’re looking for a five-year fixed expect to pay in the region of 4.43% and up.
You are very welcome to chat with one of our brokers for a no obligation quote. We can help with buy to let, residential and commercial rates. Call us on 0345 345 6788 or request a call back.
With Brexit and political uncertainty looming, we are unsure how the next few years are going to pan out, but what we do know is that the cost of borrowing is going to go up, and sitting on one’s laurels will be a costly mistake.
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*Fixed at 1.99% for 5 years reverting to Lenders Standard Variable Rate(currently, 4.49%, variable). Purchase & Remortgage applications. Early Repayment Charge: 6% year 1, 5% Year 2, 4% Year 3, 3% Year 4, 2% Year 5. Overall Cost for Comparison: 3.9% APR. Loan to Value: 50% loan to value to £1,500,000. Lender Arrangement Fee: £1,995. Broker Fee: Our standard broker fee is due on receipt of an Agreement in Principle from the lender, charged at £497 for personal applications and £597 for applications made by limited companies. We will keep any commission payments made by the lender. Alternatively, we will rebate to you any commission paid by the lender to us and charge you a broker fee of typically 1% of the total loan amount (exact percentage will depend upon the size and complexity of the mortgage application). Repayment Options: Interest only or repayment. Rent to Interest Cover: Basic Rate tax payer - 125% @ 4.99% Higher rate tax payer - 145% @ 4.99%.
**Fixed at 3.29% for 5 years reverting to Lenders LIBOR + 4.50% (LIBOR currently 0.53%, variable). Purchase & Remortgage applications. Early Repayment Charge: 5% of the amount being repaid for the first year, then 4% until the end of year 2, then 3% until the end of year 3, then 2% until the end of year 4, then 1% until the end of year 5. Overall Cost for Comparison: 4.8% APR. Loan to Value: 65% loan to value to £1,000,000. Lender Arrangement Fee: 2% of loan amount. Broker Fee: Our standard broker fee is due on receipt of an Agreement in Principle from the lender, charged at £497 for personal applications and £597 for applications made by limited companies. We will keep any commission payments made by the lender. Alternatively, we will rebate to you any commission paid by the lender to us and charge you a broker fee of typically 1% of the total loan amount (exact percentage will depend upon the size and complexity of the mortgage application). Repayment Options: Interest only or repayment. Rent to Interest Cover: Limited Company - 125% @ 3.29%.
23rd February 2018
