Securing a rate makes sense with mortgage lenders set to increase their fixed deals
Mortgage lenders are starting to increase their fixed rates following a sudden rise in the cost of funding, potentially making it worthwhile for borrowers to secure a mortgage rate now.
Coventry for Intermediaries has announced its rate will rise this week, and The Co-operative Bank for Intermediaries is having a rate reprice. Another large bank has suggested that borrowers apply soon to secure its leading rates.
Bank of England governor Andrew Bailey recently said the bank could be more aggressive in cutting the base rate, almost at the same time as the cost of borrowing started to increase.
Aaron Strutt, product director at Trinity Financial, says, "Mortgage rates have been coming down for weeks, and there are some great two, three, and five-year fixes to choose from. If your mortgage is coming up for renewal or you are buying somewhere, it does make sense to secure a rate now, monitor the market, and swap to a cheaper rate if one becomes available.
"HSBC is predicting multiple reductions to the base rate next year, so it is feasible that mortgage rates will come down again soon, but they are set to rise for the moment. Possibly by around 0.3%."
Why are mortgage rates starting to go up?
The US economy seems to be in better shape, with positive recent jobs market news. However, the Federal Reserve may not reduce its rate by the predicted 0.5%. The war in the Middle East is causing uncertainty, particularly regarding oil prices.
There is also the issue of the upcoming budget, with fears of additional government borrowing spooking the money markets, particularly after the recent mini-budget. The mortgage markets are closely linked to the Gilt markets.
Gilt stands for "gilt-edged security" and refers to a UK government bond issued by HM Treasury. The term comes from the gilded edges on the paper certificates that the British government used to issue in the past.
Tracker rate mortgage popularity rising
While most borrowers opt for fixed rates, recent data from wealth management firm Quilter shows the number of tracker mortgages taken out over the past three years jumped by 67% even as interest rates rose.
The number of tracker mortgages taken, which offer interest rates that follow the Bank of England base rate often without early repayment charges, lifted from 118,818 loans in 2021 to 198,044 by the first quarter of this year.
Call Trinity Financial on 020 7016 0790 to secure a mortgage or book a consultation
The information contained within was correct at the time of publication but is subject to change.
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