Tue 19 Jun 2018 View all news articles

Is now the last chance to get a cheap mortgage?

Mortgage industry observers have warned that the age of the cheap mortgage could soon be over, despite rates falling in recent weeks.

Analysis from mortgage brokers SPF Private Clients showed that two-year swap rates have fallen since mid-April after the anticipated increase in the Bank Rate failed to materialise.

Swap rates show the rate at which banks expect to be able to borrow and lend in a given time period. While other factors are also considered by mortgage lenders, a fall in the swap rate generally leads to a fall in the interest rates charged to customers.

In mid-April the two-year swap rate was 1.12pc, but this had fallen to 0.89pc by the end of May. Five-year swap rates also saw a similar fall in this period.

This has prompted lenders such as Atom Bank, Bank of Ireland UK, Post Office Money, Sainsbury's Bank, Newcastle Building Society and Yorkshire Building Society to reduce rates.

Mark Harris, of SPF Private Clients, said: “Swaps will continue to move up and down as the market attempts to predict the future path for interest rates. Clearly the trajectory for interest rates is upwards but by how much and at what pace is much harder to forecast.

“The UK mortgage market is highly competitive and over supplied in certain areas – this is the main downward pressure on mortgage rates.”

Aaron Strutt, of mortgage brokers Trinity Financial, believed it was unlikely that rates would fall further.

“We have been at this point before, but rates are unlikely to get much cheaper unless an incredible one-off deal comes out of nowhere,” he said.

Mr Strutt said Halifax was another bank offering low rates and cashback deals. He said the five-year fixed rate mortgage at 1.83pc, including £1,000 cashback, was the pick of its range.

“It is also worth considering a variable rate mortgage,” he added. “Although we expect rates to go up, the Bank Rate would have to go up a few times in the next couple of years for variable rates to be considered uncompetitive.

“The cheapest variable rate is 0.97pc from Accord. This compares to the cheapest two-year fix at 1.36pc from Yorkshire Building Society. There is quite a gap there. So if you are willing to take a risk on the rate going up only once or twice then that rate can be quite attractive.”

Source: The Telegraph

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