LoginSubscribe to Alerts

End of the road for rock-bottom mortgage rates?

Posted 3 July 2017

Are the days of ever-lower mortgage rates coming to an end? We look at the property market and decide...

Over recent months borrowers have benefited from the lowest mortgage rates ever recorded. A fierce price war between lenders, and a low-interest-rate environment, have seen deals fall to record-breaking levels, but now experts are saying that the era of low rates is beginning to come to an end.

The Council of Mortgage Lenders (CML) has warned homeowners that rates can only go up, acknowledging that deals have already started to cost more.

'Little scope' for a further improvement in rates

Over recent months, low mortgage rates have helped first-time buyers get onto the property ladder and benefited thousands of homeowners. Now, the CML has urged borrowers to take advantage of the current deals before rates begin to creep up. It says that the housing market has “stalled” over the last few months and the cost of borrowing is already starting to sneak up. Part of the reason for this is because rates have fallen so low that banks and building societies simply have no room to cut rates any further.

It says: “Mortgage rates are still close to historic lows, but we see little scope for further improvement with recent data showing a slight increase in mortgage rates on offer. This might also temper appetite for remortgaging.”

First-time buyers could well be hit first, as the CML says that rate rises are “more evident” for those with smaller deposits. It said that rates for first-time buyers have been “edging up” since the closure of the government's Help to Buy mortgage guarantee scheme at the end of last year.

Experts have long been encouraging borrowers sitting on their lender's standard variable rate deals to switch to a better deal.

Charlotte Nelson from financial analysts Moneyfacts says: "Mortgage rates have shown signs of hitting rock-bottom levels. Lenders have no more margin to cut. So they can only go up. There is also talk of the base rate going up in the near future."

Bank official's comments make base rate rise in 2017 more likely

The CML's warning comes in the same week that an important Bank of England (BoE) official said that he is likely to vote to increase the base rate from 0.25% to 0.5% later this year.

Five members of the BoE's Monetary Policy Committee voted for rates to remain on hold earlier this month, with three backing a rise. Chief economist Andy Haldane says that he is likely to vote to raise rates in late 2017, making a rise in the cost of borrowing more likely.

It sets him on a collision course with the bank's governor, Mark Carney, who believes that now is not the time to raise rates. Mr Haldane would need to be joined by just one other official to gain the 5-3 majority needed to push rates up.


20 February 2024
Bromford is working with The Mortgage People to advise homebuyers about the best way to a successful mortgage application...Read more
2 February 2024
Ben Thompson, deputy CEO at Mortgage Advice Bureau, shares his top tips to consider before buying a home with a sibling or friend...Read more
31 August 2023
We guide you to ensure the process of buying a second home for yourself or family is as straightforward as possible...Read more
Sign up for email alertsGet the latest properties and updates sent directly to your inbox daily, weekly or immediately you are in control.
Subscribe to Alerts
Search news and advice
Individual savings and affordability may vary.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP PAYMENTS ON YOUR MORTGAGE.

If you choose to use Tembo for mortgage advice, we may earn a commission from them for the introduction. This does not negatively impact the amount you'll pay for their service.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652.

Click here to see your activities