Mortgage rates have started to rise again, with five-year fixed rate mortgages moving up from their record lows. This is partly down to the improving economy, plus expectations that interest rates will now rise sooner rather than later.
Concern has been growing that as the economic recovery properly starts to take hold, the Bank of England will need to look to increase the Bank Rate. The Bank has said it would only consider doing so when unemployment falls to 7.0%.
With the latest unemployment data showing that the figure has now fallen to 7.1%, some believe that this means a Bank Rate hike could be later this year. However, markets generally still expect the Bank’s monetary policy committee to hold off until 2015 at least.
Despite this, regardless of what happens to the Bank Rate, the withdrawing this month of the government’s Funding for Lending scheme, which allowed lenders access to cheap money, plus the rise in swap rates – which lenders use to price their loans – add to the impetus for rising mortgage rates.
Indeed, rates on new mortgage deals have already started to move and more may rise in the coming months. Many of the leading banks and building societies have either increased their five-year fixed rates deals or withdrawn products altogether over the past couple of weeks. So a lot of the very cheap deals have now disappeared.
There are fears that as mortgage rates go up, many homeowners with short-term fixed or variable rate mortgages could struggle to afford the higher repayments. For many too, once rates do start to go up in earnest, they could find it too late to fix.
At the moment, there are still some good rates on offer, and due to the increased confidence in the markets, now is a good time to be looking for a home loan.
So it might be a good time to think about your mortgage options.