Will the Mortgage Limbo Continue in 2017?
3 minute read
The Bank of England’s record-low interest rate of 0.25%, announced in August 2016, in addition to stiff competition between lenders, sent mortgage rates tumbling last year. Many mortgage providers hit record lows with their offerings for home buyers and remortgagers, with average rates on two-year fixed mortgages hitting an all-time low of 2.31% in January 2017. But will this trend continue as Britain (and the world) faces ever-greater political turbulence and economic uncertainty, or is the mortgage limbo almost over?
A Murky Future
Opinion on whether or not the “mortgage limbo” is coming to a close is divided. Throughout Q3 and Q4 of 2016, mortgage providers were involved in a very serious battle of “how low can you go?”, with lenders offering ever-lower rates and ever-sweeter deals to seduce customers in an incredibly competitive marketplace. The latter half of last year was also a peak year for remortgages, with many homeowners taking advantage of these unprecedented low rates to arrange fixed mortgages at very low prices. Today, many in the industry foresee “the limbo” continuing in the near future, while others point to signs that the dance may, at last, be over… January’s drop in two-year fixed mortgage rates was enough to convince many commentators that low, low rates are here to stay – at least for the remainder of Q1 2017. The average five-year fix is also at a very low rate of 2.92% compared to the equivalent 3.27% rate in 2016. As uncertainty grows over the future of Britain and its relationship with the EU, fixed rates, like these low five-year schemes, are rising in popularity, with many buyers keen to secure these super-low rates in a bid to weather what could be an impending economic storm. But it’s not all tumbling rates. In recent months, some mortgage providers have begun to inch up their offerings. HSBC, for example, which offered a headline-making, history-beating 0.99% two-year fixed mortgage in June 2016, has since increased its rates because of rises to overall costs.
Swap Rate Rises
An increase in swap rates triggered by marketplace fears following the election of Donald Trump is also likely to start affecting lending rates. Many predict this will have a knock-on effect on mortgage rates, sending them rising from record lows, despite the fact the Bank of England appears to have no plan to increase the UK’s rate of interest any time soon. With so many political and economic factors at play, it’s very difficult to predict what’s next for the UK’s mortgage rates. With rates unlikely to drop further and potential rises very possible, obtaining a fixed-rate mortgage may be a prudent step at this stage.