Mortgage blog: Why you should grab a great mortgage deal now

Posted 10 July 2013

If you're considering taking out a mortgage in the near future, you should move to secure your low rate deal sooner rather than later. That's the view of leading mortgage experts who believe that rock-bottom mortgage rates are set to rise over the next few weeks following a sharp increase in ‘swap' rates - the rates at which banks borrow from each other.

Money Marketing reports that "a year-long trend of falling mortgage rates could be coming to an end". So is now the time to secure your mortgage deal?

Will sharp rises in swap rates see the cost of mortgage deals rise?

‘Swap' rates are borrowing rates between different financial institutions and are closely linked to the price of mortgages. Falling swap rates usually result in cheaper mortgage deals while rising swap rates tends to result in increases in the cost of home loans.

On 17 June this year, two- and five-year swap rates were 0.75% and 1.34% respectively. However, comments from Ben Bernanke, the chairman of the USA Federal Reserve, have since hinted that the US could end its quantitative easing programme in 2014. Swap rates have subsequently risen initially to 0.84% for two-year and 1.59% for five-year periods and, most recently, 1.01% and 1.85% respectively.

"Swap rates have risen sharply over recent weeks which, historically, would result in an increase to the cost of mortgages," says Keith Osborne, editor of "Over recent weeks many potential buyers and remortgage clients have been holding off securing their new mortgage as rates have been gradually falling. Now, it looks like the right time to finally grab a low-cost deal as it appears that interest rates only have one way to go - and that is up."

We recently reported how government intervention had substantially reduced the cost of mortgages in the last year. Bank of England data showed that the average fixed-rate mortgage at 75% loan-to-value has fallen by around 0.8% over the last year while the cost of the average 90% deal is down by almost 1%. However, an era of falling rates could be set to come to an end.

"There have been no signs yet that lenders are planning to withdraw their very best deals and re-price them," adds Osborne. "However, with swap rates rising by over 0.5% for five-year deals in the last couple of weeks I would be very surprised if the cost of deals didn't start to increase. So, if you've been holding off securing a mortgage product while rates have been falling, now could very well be the time to act."

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