Fixed rate mortgages have reached a record low, but experts are warning that these products could disappear in the near future as banks face rising costs. With predictions that the window of opportunity for borrowers to secure some of the lowest fixed rate deals in history is becoming increasingly narrower, contractors looking to secure a mortgage are urged to move now before rates rise again.
Experts warn that lenders face a considerable rise in the cost of funding mortgage loans, and there is a strong likelihood that rates on new fixed rate products will increase soon as a result of this.
In recent times, rates have dropped to record lows following Government incentives to try and stimulate the property market. Currently, borrowers are able to benefit from two year fixed rate products as low as 1.5%. In July, it was reported that half of borrowers were able to save money by remortgaging, making it the best time for contractors to refinance their home loans in over six years.
However, as the strength of the economy is improving as a result of slashed mortgage rates, money market rates, which underpin the competitive products offered by lenders, have since begun to climb. Banks typically agree fixed mortgage pricing based upon the money market’s ‘swap’ rates. In the past week, swaps on five year fixed products have risen from 1.77% to 2.01%.
The increased swap rates are already having an impact on the mortgage marketplace, with some lenders withdrawing best buy products and increasing rates. This week, Yorkshire Building Society has pushed up the rate on their five year fixed rate deal for the second consecutive week. Two weeks ago, Yorkshire Building Society’s five year fixed product could be secured at a rate of 2.44%, but this has now risen to the current rate of 2.59%.
First Direct have also increased its five year fixed rate product for customers with a 10% deposit to 4.39%, up from 4.19% last week. Norwich & Peterborough and Nationwide have also joined the bandwagon by hiking up their fixed rate mortgage deals.
Simon Butler, a Senior Mortgage Consultant at Contractor Mortgages Made Easy, said “Although we cannot be certain that increased swap rates will hold, they have increased significantly over the past week, and lenders are already reacting by implementing higher fixed rate deals. Despite the fact that mortgages are no longer as directly linked to swaps as they used to be, it would certainly appear that lenders cannot overlook the rising costs of funding home loans, and there is definitely a strong indication that rates will soon be rising, not reducing.”
Experts say that although rates are very likely to rise soon, they could still remain competitive in the short term as banks fiercely compete for business whilst the property market rejuvenation continues. However, it seems that contractors could save thousands by moving sooner rather than later, as lenders continue to hike up their rates.
Article By: Jon Shields, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080