Mortgage rates have never been lower but repeated warnings of an imminent interest rate rise from the Bank of England are likely to push them up – and soon.
Experts are warning homeowners to lock in to rock-bottom rates sooner rather than later, with research firm Capital Economics forecasting the average rate will be back above 3 per cent by the end of 2019.
At the moment, it’s still possible to fix below 1 per cent for two years if you have a sizeable deposit; five-year fixed rates come as cheap as 1.55 per cent.
Lenders are continuing to offer fiercely competitive mortgage deals but it may not last
For now, lenders are continuing to offer fiercely competitive deals with Yorkshire Building Society launching a new best buy rate of 1.55 per cent last week, with a £1,495 fee for both remortgage customers and home buyers who have a 35 per cent deposit or equity stake.
The society has also launched a best buy 0.99 per cent two-year fixed-rate mortgage for borrowers with up to a 25 per cent deposit with a £1,495 fee and free standard valuation.
However, it’s pulling the 0.99 per cent two-year fix for those with just a 20 per cent deposit that was first offered through the lender’s broker arm, Accord Mortgages, just 10 days ago.
Santander has launched a new two-year fixed-rate mortgage, priced at 1.74 per cent for those borrowing up to £550,000 at 85 per cent loan-to-value with no product fee.
And Leeds Building Society has also reviewed its range and now offers a two-year fixed rate at 1.55 per cent for those borrowing up to £500,000 at 65 per cent loan-to-value with a £999 fee.
But rock-bottom rates may not be around much longer. Minutes from September’s Monetary Policy Committee meeting struck an increasingly hawkish note, prompting some economists to forecast a rise in Bank rate at November’s meeting.
Repeated hints to this effect from Bank of England governor Mark Carney have already started to push up funding costs for mortgage lenders.
Two and five-year swap rates, an important determinant of mortgage pricing, have jumped by roughly 30 basis points since the minutes were released.
It has already prompted some lenders to raise rates.
Nationwide hiked its two-year fixed rates by 0.25 percentage points across 60 per cent and 75 per cent loan-to-values and 0.1 percentage points at 80 and 85 per cent LTVs this week, while Skipton Building Society confirmed its rates are set to rise soon.
Ed Stansfield, chief property economist at Capital Economics, said: ‘By the end of 2019 we expect Bank rate to sit at 1.75 per cent. Accordingly, it seems almost certain that mortgage interest rates are now approaching a turning point.’
