I read a report on a mortgage broker news site yesterday saying that markets were expecting a Bank of England interest rate rise in April or May this year. This will of course have a knock on effect on the cost of borrowing from banks and building societies.
The rise(s) will likely be by a quarter of one percent each time so individually the changes will not be dramatic. However there are other factors that have given us historically low interest rates over the last few years.
Those with good memories will remember the Bank of England and UK Treasury Funding for Lending scheme launched in 2012 and designed to encourage lenders to lend to more households and businesses. The scheme (in my opinion) was a success and contributed to a prolonged period of extremely competitive lending in the UK.
There was also another scheme launched in August 2016 that flew somewhat under the radar called the Term Funding Scheme (TFS). This was part of a package of measures to help stimulate growth in the aftermath of the decision to leave the EU in 2016. This included the swift reduction of the Bank of England base rate to 0.25%, the measures “designed to provide additional support to growth and to achieve a sustainable return of inflation”. The target inflation rate being 2%. This TFS scheme comes to an end this month so that means banks and building societies will have to revert back to unsubsidised lending. Potentially this could mean an increase in rates.
Should You Secure A Mortgage Product Ahead Of Any Rise?
The article I read concluded that, assuming the above TFS is not extended, that rates will have to rise and that as mortgage brokers we should make hay while the sun shines. Certainly in the last year I have arranged mortgages with interest rates of under 1% over two years, I don’t think we’ll be seeing that again. Currently I think five year fixed rates do look good value for money with plenty of lenders offering sub 2% deals for five years.
If you are looking to arrange a mortgage now I’d weigh up your options and also consider what personal circumstances may change in the future when making your decision.
While, I would be delighted to help you find the best mortgage deal for your circumstances, I’m not going to scare you into acting today. Get in touch and we can discuss your options, stress test some product, and look at whether now is the opportune time for you to secure a mortgage (or remortgage).
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