UK mortgage rates starting to rise again?

UK mortgage rates may be starting to rise again, following several months of record lows.

Mortgage rates have been at historic levels of affordability for some time in the UK, but have fallen even lower in recent months, thanks to the Bank of England’s decision to lower rates from 0.5 per cent to an all-time low of 0.25 per cent.

In June, HSBC led the way, with a 0.99 per cent two-year fixed rate mortgage. Now, though, the lender has withdrawn that deal, sparking speculation that the age of low mortgage rates could soon be at an end.

Indeed, bank funding costs have climbed in the month following Trump’s election, while economic confidence, bolstered by his spending plans, have also led to expectations that the Federal Reserve will raise US interest rates at the close of 2016.

The Financial Times notes that swap rates, which guide the pricing of fixed-rate mortgages, have been climbing in recent weeks.

Tracie Pearce, head of mortgages at HSBC, confirmed to the FT: “Over the past four weeks we have seen the cost of funding increase, especially for two- and five-year mortgages.”


Brexit: UK mortgage rates expected to stay low

21st July 2016

UK mortgage rates are expected to stay low in the coming years, as the housing market enters a period of Brexit negotiations from a strong starting position.

The outlook for the UK housing market is uncertain, with general purchasing activity expected to weaken in the short-term, due to buyer caution, but the majority of the property industry remains relatively confident in the long-term outlook for UK real estate, as the fundamentals of low supply and high demand remain the same.

Indeed, one of the driving fundamental factors of the UK housing market’s activity in recent years has been the record low mortgage rates available, making it potentially more affordable for buyers to get on the housing ladder and for homeowners to remortgage.

The latest figures from the Council of Mortgage Lenders estimate that gross mortgage lending reached £20.7 billion in June – the highest June figure in eight years.

Lending was 16 per cent higher than May’s lending total of £17.8 billion and 3 per cent higher than the £20.1 billion lent in June 2016. Gross mortgage lending for the second quarter of 2016 was therefore, as estimated, £56.1 billion. This is 10 per cent lower than the first quarter of this year, but 8 per cent higher than the second quarter of 2015.

“The result of the EU referendum is likely to affect the housing market, but there remains considerable uncertainty. Although mortgage firms have ample lending capacity, activity levels are likely to bear the brunt of any market adjustment over the next six months or so, as buyers and sellers wait to get a clearer idea of where we might be headed,” commments CML senior economist Mohammad Jamei.”

“But as with the economy, the UK housing market’s starting position is relatively favourable, with transactions having increased by almost 80 per cent from post-crisis lows.”

Over the next six months, the CML anticipates activity to “soften modestly”, with lending to be driven more by remortgaging and less by house purchases.

“We could continue to see an increase in lending over the coming months, but the longer term lending outlook remains a bit ‘foggy’. The EU exit decision came as a surprise to many and a lot will now depend on how things settle following the initial jolt,” adds Henry Woodcock, principal mortgage consultant at IRESS.

Nonetheless, Woodcock welcomes the promising figures.

“The positive indicators were there if one looked beyond the rhetoric of the daily bombardment of contradicting referendum messages,” he continues. “Mortgage lenders stayed calm, rates stayed low and many lenders looked to build market share with competitive deals. One month on from the leave vote, rates are predicted to stay low for another two years. Investment in the mortgage market continues with new lenders such as Atom Bank and others coming to market in the next six to 18 months.”