Mortgage interest rates have been steadily increasing since before January 2022, but where are they likely to peak? And when?
It’s fair to say that, so far, 2022 has not gone entirely to economic plan. We started the year with predictions that inflation would peak in April at around 8%. July saw inflation surpass a 40-year record to 10.1%. Re-adjusted forecasts now anticipate the UK inflation rate to peak at 18% in early 2023; however, the Bank of England maintains it’ll be around 13% at the end of 2022. We shall wait and see.
Only a few months ago, experts fore-saw the Bank of England Base Rate (BBR) would be 1.75% or maybe 2% by the end of this year. August’s BBR rise took us to 1.75% earlier than many expected, and now the consensus is that September’s Monetary Policy Committee (MPC) meeting will increase BBR by 0.5%, followed by another 0.5% increase in November, taking BBR to 2.75% as we enter 2023.
It doesn’t stop there, however. Given the unfounded rate of inflation, economists anticipate the Bank of England Base Rate could increase to 3.75% by the spring of 2023. For context, BBR hasn’t been above 3% since November 2008.
But it’s not just the Base Rate that impacts your mortgage interest rates. SWAP rates, which are the rates lenders pay other banks and investment institutions to acquire funds, have also risen sharply. In the last few weeks alone, five-year SWAPs have shot up from around 2.2% to 3.3%. They haven’t been this high since 2016 (interestingly, mortgage rates were lower then).
What does this mean for buy to let mortgage interest rates?
Following the last BBR increase at the start of August, lenders have been busily adjusting BTL mortgage rates up again. However, while we’ve gotten used to product sets increasing by c0.2%, the jumps are getting bigger. We now anticipate most lender increases to be 0.4-0.6% at a time, which quickly takes high 3% interest rates to mid-4%s.
How high will BTL mortgage interest rates go?
Looking at the BBR predictions alongside SWAP rates, we now anticipate that most specialist buy to let mortgage rates will start from 5% this autumn. Most predictions don’t see them coming down again in at least the next 12 months.
Our message to you is simple: don’t wait, and don’t delay.
Lenders are not extending mortgage offers; once a rate is gone, it’s really gone. You can read our piece from June about the true cost of delay; these figures will have only increased since.
Once you or your broker have found an agreeable rate, whether for a purchase, remortgage or capital raise, you must get all your documents together quickly to secure the rate. Most lenders require a formal application submission to do this.
Remember, you can often secure remortgage rates four to six months ahead of your early repayment charge (ERC) period ending. So, if your remortgage is due from March to April 2023, you need to start thinking about the process, now.
26th August 2022